TEST BANK for Small Business Management Launching & Growing Entrepreneurial Ventures 19th Edition by by ACADEMIAMILL

TEST BANK Small Business Management Launching & Growing Entrepreneurial Ventures 19th Edition by Justin Longenecker, Test BankWilliam For Petty, Leslie Palich, Frank Hoy Small Business Management Launching & Growing Entrepreneurial Ventures 19e Justin G. Longenecker, J. William Petty, Leslie E. Palich, Frank Hoy Chapter 1-23

Chapter 01 - The Entrepreneurial Life The Entrepreneurial Life 1. The universally accepted definition of the term small business is based on the number of people employed by the firm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 2. There is no single definition of entrepreneurship. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 3. An entrepreneur who bootstraps would resort to bartering or using a personal credit card. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 4. Entrepreneurs should avoid hiring mediocre people. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 5. Research departments of big businesses tend to focus on innovating and creating new products. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember Page 2

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6. Managers who buy out founders of existing firms may be classified as entrepreneurs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 7. Franchisees have limited power because they have a contract and relationship with a franchising organization. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 8. An entrepreneurial team consists of the owner, the financier, and one key employee. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False Page 3

LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 9. The mission of XYZ Company is to reduce landfill waste by recycling plastic containers into other useful products. XYZ Company is a social entrepreneur. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 10. The starting point of any competitive advantage is having a commitment to integrity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 11. Josie's position was eliminated when the company moved its operations to another state, so she started her own business. Josie is a reluctant entrepreneur. a. True Page 4

b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 12. One of the richest rewards of owning a small business comes from offering goods or services that improve the lives of customers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-0 The Entrepreneurial Life QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.00 - LO: 1-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 13. Xavier had many ideas about new products, but no one in his corporation seemed interested. So Xavier left and founded his own company to create these new products. Xavier is a corporate refugee. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Page 5

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14. The primary motivation for owning your own business should be to make as much money as possible. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 15. Most entrepreneurs work shorter hours in their own businesses than they did when working for someone else because they have no boss to report to. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 16. Self-employed individuals are less likely to create greater personal wealth than persons who work for others. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Page 6

REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 17. According to Stephen Covey, if we want to make important changes in our lives, we need to change from the insideout. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 18. The entrepreneur personality examines why a business does what it does. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM Page 7

19. Small businesses have a greater potential to provide good customer service than larger firms do. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 20. An entrepreneurial legacy is limited to the tangible assets of the business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-5 What Do You Want Your Legacy to Be? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.05 - LO: 1-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 21. Small enterprises hire 43 percent of all _____ employees. a. high-tech b. male c. medical d. female ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-1 Small Size, Great Significance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.01 - LO: 1-1 Page 8

NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 22. Which of the following types of small businesses makes up the largest sector of the U.S. economy? a. High-potential ventures b. Gazelles c. Lifestyle businesses d. Attractive small firms ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 23. Which of the following has helped level the playing field for small firms competing with larger companies? a. Quality performance b. Customer focus c. Financial services d. Innovation ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 24. A paradigm shift is Page 9

a. when you move capital. b. a change in opportunity. c. a change in how we fundamentally see a situation. d. a reorganization of a company. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 25. Adam has contracted with about a third of the dozens of artisans in his town in the mountains of South Carolina. His reputation has grown; he now believes the sky's the limit for this website design and maintenance business. What kind of small business does Adam have? a. Lifestyle business b. Microbusiness c. High-potential venture d. Attractive small firm ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:27 PM 26. Small businesses that have great prospects for growth are called a. gorillas. b. antelopes. c. jaguars. d. gazelles. ANSWER: d POINTS: 1 Page 10

DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 27. Which of the following is NOT one of the four stages of the entrepreneurial process? a. Harvesting the business b. Analyzing the industry c. Identifying an attractive opportunity d. Acquiring the critical resources needed for growing the business ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 28. A firm that provides substantial profits to its owner is called a(n) a. franchise. b. high-potential venture. c. attractive small firm. d. lifestyle business. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Page 11

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29. Bailey works as a self-employed golf pro at the local country club, allowing him to spend more time with his young family. He'll never earn much, but he and his family are happy. Which type of small business does Bailey have? a. Gazelle b. Attractive small firm c. High-potential venture d. Lifestyle business ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:28 PM 30. Carmen operates a franchise tanning salon. Negative publicity about the effects of tanning has diminished her ability to grow the business. Carmen has a(n) a. high-potential venture. b. attractive small firm. c. gazelle. d. microbusiness. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 31. Which of the following best fits the definition of a small business? a. A manufacturer with 75 investors Page 12

b. A hardware store franchise with 20 employees c. A fast-food franchise with locations in three states d. All of these are correct. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 1/3/2019 4:53 AM 32. Using the criteria in the text to define a small business, Table Occasions will NOT be considered a small business once the company a. is financed by three individuals. b. has sales greater than 20% of other firms in the industry. c. is operating in numerous states. d. has 50 employees. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 33. Devon believes now is the time to launch his welding business because the only competitor has just announced his retirement. Devon is in which state of entrepreneurship? a. Identifying an attractive opportunity b. Executing the plan c. Acquiring the critical resources needed for growing the business d. Harvesting the business ANSWER: a POINTS: 1 DIFFICULTY: Moderate Page 13

REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 34. In a small business, there is no more important issue than a. making a profit. b. efficiently managing resources. c. exploiting opportunities. d. scaling the business. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 35. Francesca convinced her aunt to invest in her day spa in exchange for a percentage of the profits. Francesca is a. taking advantage of her aunt. b. capitalizing on an opportunity. c. conserving her own resources. d. bootstrapping. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply Page 14

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36. Geraldo often would rather go fishing than work his business. According to Stephen Spinelli and Robert Adams, which entrepreneurial characteristics does Geraldo lack? a. Commitment b. Courage c. Creativity d. Tolerance of risk ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 37. Which of the following is an almost certain way to fail as an entrepreneur? a. Overestimate what you can do. b. Tolerate uncertainty. c. Share ownership in the business in an equitable way. d. Focus on a niche market. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 38. Henry is well respected by his employees. He has the ability to self-motivate and team-build with a focus on honesty in business relationships. What attribute does Henry display? a. Determination b. Leadership abilities Page 15

c. Tolerance of risk d. Motivation to excel ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 39. Isabella overheard her customers discussing their desire for more baked treats suitable for diabetics. Immediately, she added sugar-free items to her inventory. Isabella has strong a. creativity. b. leadership abilities. c. opportunity obsession. d. tolerance of risk. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 40. Jasper is so convinced he will succeed that he has mortgaged his home, maxed out his credit cards, and borrowed from his retirement savings to finance his business. Jasper is high in a. commitment. b. leadership abilities. c. creativity. d. tolerance of risk. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together Page 16

QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 41. Kevin developed a clever marketing campaign that increased his sales by 48%. Kevin is high in a. commitment. b. leadership abilities. c. creativity. d. tolerance of risk. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 42. Lance has set for his business the goal of increasing revenues by 20% and profits by 15% by the end of the year. Lance is likely high in a. tolerance of risk. b. opportunity obsession. c. leadership abilities. d. motivation to excel. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply Page 17

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43. Martina expected to build her direct sales business to the point that she could quit her day job after six months. Five months later, she barely has any customers. Martina a. has overestimated what she can do. b. knows her market well. c. is a domineering manager. d. should take on a partner. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 44. Natalie enjoyed yarn crafts so she opened a yarn and craft store in her small town. Sales have been dismal; few people visit her store. Which of the following mistakes did Natalie make? a. She overestimated what she could do. b. She lacked an understanding of the market. c. She hired mediocre people. d. She failed to share ownership in the business in an equitable way. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 45. Oscar wants everything in his restaurant to be perfect so he points out every little mistake his servers make. He has high turnover among his staff. Which of the following best explains why? a. Oscar is a domineering manager. Page 18

b. Oscar is not a team player. c. Oscar lacks tolerance of risk. d. Oscar lacks an understanding of his market. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 5:01 PM 46. Which of the following is the foundation of all relationships, including those in business? a. Trust b. Tolerance c. Quality performance d. Acceptance ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 47. An entrepreneur's success generally arises from all of the following EXCEPT a. having a desire to lead. b. having a clear mission. c. discounting ideas from others to improve products. d. recognizing that business success requires hard work and long hours. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together Page 19

QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 48. Raold operates a fast-food restaurant. He is under contract to the organization under whose name he does business. The contract limits what Raold can do with his business. Raold is a a. franchisor. b. franchisee. c. contract employee. d. partner in a limited liability company (LLC). ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 49. Bill Gates and Steve Ballmer, founders of Microsoft, would be considered a. franchisors. b. franchisees. c. an entrepreneurial team. d. sole proprietors. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply Page 20

DATE CREATED: DATE MODIFIED:

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50. Sabrina has figured out how to recycle clear plastic bottles into woven fabric and has launched a new business. Sabrina is a. an entrepreneurial team member. b. a social entrepreneur. c. risk averse. d. a franchisee. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 51. Sally, a single mother, opened a florist shop to support her family after losing her job in a corporate layoff. She is a(n) a. social entrepreneur. b. corporate refugee. c. reluctant entrepreneur. d. independent refugee. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:57 PM 52. When a Fortune 500 business lays off workers, some displaced employees may decide to start their own businesses. They are best described as a. corporate refugees. b. welfare profiteers. Page 21

c. corporate entrepreneurs. d. reluctant entrepreneurs. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 53. Tatiana was laid off from her manufacturing job and, in desperation, launched a business providing transportation services for the nondrivers in her community. We would classify Tatiana as a a. social entrepreneur. b. creative entrepreneur. c. corporate refugee. d. reluctant entrepreneur. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 54. The daughter of the owner of a large business disliked her father's criticism and eventually decided to quit the family business and start her own business. The daughter is a a. corporate opportunist. b. gazelle. c. reluctant entrepreneur. d. corporate refugee. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business Page 22

QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 55. Ursula works within a large corporation. Her job is to take ideas and turn them into profitable products for the business. Ursula is a(n) a. social entrepreneur. b. reluctant entrepreneur. c. corporate refugee. d. intrapreneur. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 56. Lydia works as a senior network administrator and is dissatisfied with the stifling bureaucratic environment of her job. She is considering venturing out on her own as a consultant. If she carries through with her intentions, she would be considered a(n) a. corporate pariah. b. entrepreneurial dilettante. c. bureaucratic emigrant. d. corporate refugee. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Page 23

TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Motivation Concepts Bloom’s: Apply 8/29/2018 11:20 AM 12/19/2018 4:59 PM

57. Michael owns a dry-cleaning business. He is planning to retire at the end of the year and his son, Bryant, will take over the business. Bryant is a(n) a. intrapreneur. b. corporate refugee. c. franchisee. d. second-stage entrepreneur. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 58. Vincent's business has grown; he now employs 14 people. He enjoys teaching new employees the skills they need to make his products. One of Vincent's reasons for being in business for himself is a. personal satisfaction. b. independence. c. financial rewards. d. being the best he can be. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 59. A Harris poll inquiring into the reasons that entrepreneurs give for owning a company found that the number-one Page 24

reason is to a. fill a niche. b. improve financial well-being. c. be the boss. d. follow a passion. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 60. Which of the following is NOT a characteristic of the entrepreneur personality? a. Delegates authority b. Sees the business as a system c. Asks how the business must work d. Visualizes the future ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 61. Valerie has been described as a "free spirit." She has tolerated but seldom appreciated parental, academic, or even job authority. The factor most likely to lure her to entrepreneurship is a. profit opportunities. b. freedom to operate independently. c. enjoyment of doing what she likes to do. d. satisfaction in serving the community through the business. ANSWER: b POINTS: 1 Page 25

DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 62. Walter wanted to be able to make decisions about issues that directly affected his department; however, in his corporation, the managers made all the decisions. So Walter left the corporation and started his own firm. Walter was looking for a. personal fulfillment. b. personal satisfaction. c. independence. d. financial rewards. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 63. Many entrepreneurs are highly motivated by the prospect of a. an easy life. b. making money. c. freedom from long hours. d. job security. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion Page 26

TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Motivation Concepts Bloom’s: Understand 8/29/2018 11:20 AM 12/19/2018 4:49 PM

64. A corporate manager chafes under red tape and bureaucratic regulations until finally deciding to start a separate business. The apparent reward he seeks is a. community service. b. a satisfying way of life. c. independence. d. the satisfaction of working with people. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 65. Xavier believed his labor was only making others rich while he struggled from paycheck to paycheck. He started his own small business and now labors only for himself. Xavier's motivation is a. personal fulfillment. b. personal satisfaction. c. independence. d. financial rewards. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM Page 27

66. Zelda worked for years in a medical clinic as a biller and coder. Now she operates her own billing service for several doctors. Zelda has a(n) _____ personality. a. technician b. manager c. entrepreneur d. artisan ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 67. Although Abner started the business by making his own product, his greater talent is planning for the future and preparing the business for growth. Abner has a(n) _____ personality. a. technician b. manager c. entrepreneur d. opportunistic ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 68. Ben seems to have the Midas touch. He can recognize opportunity where others see only problems. His focus is on providing results for customers. Ben has a(n) _____ personality. a. technician b. manager c. entrepreneur d. opportunistic Page 28

ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 69. Calvin knew his small local hardware store could not compete on price with the big-box discounters so he began offering classes for new homeowners and found other ways to provide services the bigger stores don't. Calvin's competitive edge is a. customer focus. b. quality performance. c. innovation. d. niche markets. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 70. Darlene was disappointed with mass-produced children's clothing that fell apart after a couple washings, so she and her few employees began making garments that would hold together until they were outgrown. Darlene's competitive edge is a. customer focus. b. quality performance. c. niche markets. d. integrity and responsibility. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? Page 29

QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 71. Legend holds that Abraham Lincoln walked miles to return two cents change to a customer. His actions demonstrate a. customer focus. b. quality performance. c. integrity and responsibility. d. social entrepreneurship. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply NOTES: Individual Dynamics DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:41 PM 72. Entrepreneurs are more likely than large companies to capitalize on innovations because a. entrepreneurs have more time to be creative. b. larger corporations must satisfy stockholders and cannot take risks. c. entrepreneurs are more likely to find grants for research. d. research departments of big businesses tend to focus on improving existing products. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand Page 30

DATE CREATED: DATE MODIFIED:

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73. Evelyn opened a small boutique catering to a very narrowly defined target market. Evelyn's competitive edge is a. the niche market. b. customer focus. c. quality performance. d. innovation. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 74. Flora built her business from two employees to more than 2,000 during her 30 years in business. She was able to endow a scholarship fund to the community college and to leave her children a perpetual income. We call this her a. corporate responsibility. b. social mission. c. good citizenship. d. entrepreneurial legacy. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-5 What Do You Want Your Legacy to Be? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.05 - LO: 1-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 75. Garner places great emphasis on operating his business to the highest standards of honesty and ethics. Garner likely believes a. the end justifies the means. b. how you achieve is as important as what you achieve. Page 31

c. the customer is always right. d. good guys finish last. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-5 What Do You Want Your Legacy to Be? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.05 - LO: 1-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:32 PM 76. The material assets and intangible qualities passed on to both heirs and society make up an entrepreneur's a. mission. b. personality. c. history. d. legacy. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 1-5 What Do You Want Your Legacy to Be? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.05 - LO: 1-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 77. Discuss similarities and differences of entrepreneurs and small business owners. ANSWER: An entrepreneur pursues opportunities in either a new or existing business to create value, while assuming both the risks and the rewards for his or her efforts. Depending on the size of his/her business, an entrepreneur may also be a small business owner in that a generalized definition of a small business is one with geographically localized operations, fewer than 100 employees, and equity financing provided by no more than a few individuals. With proper application of entrepreneurial principles, a small business owner may actually grow his or her company enough to be larger than this definition. POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Essay Page 32

HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 78. Explain the nature of and differences among microbusinesses, attractive small firms, and high-potential ventures. ANSWER: Microbusinesses are small firms that provide minimal profits to their owners. Attractive small firms offer substantial financial rewards for their owners, where profits may grow into the millions or even tens of millions of dollars. They also can provide rewarding careers for employees. High-potential ventures (also called gazelles) are businesses with phenomenal prospects for growth. These firms are usually high tech, with the potential to change how people live. POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 79. List and briefly describe the four stages of the entrepreneurial process. ANSWER: From beginning to end, entrepreneurship involves four stages. 1. Identifying an attractive opportunity. An opportunity is more than merely having a good idea. Real opportunities should be market driven, offering customers a product or service that is so appealing that they are willing to let go of their hard-earned money to buy it. 2. Acquiring the critical resources needed for growing the business. In a small business, there is no more important issue than efficiently managing resources. Thus, learning how to think about resources may mean the difference between success and failure. When entrepreneurs think about resources, they should not just think about money. It is important to also understand the following: • Entrepreneurs find ways to do more with less when it comes to resources. • Critical resources include more than money, such as the right management team, the right partners, and access to the right assets, such as inventory and equipment. • Entrepreneurs sometimes must bootstrap, such as resorting to bartering, generating income from other sources, or using a personal credit card. 3. Executing the plan. The entrepreneur must now scale the business to make it economically attractive. Among other things, the entrepreneur will need to know how the firm will make money, support growth, and create barriers to entry to keep Page 33

the competition away. 4. Harvesting the business. At some point, an entrepreneur must think about exiting the business to capture the value that he or she has created over the years. This can happen by passing the business on to the next generation in the family, by selling the company to other investors, or in a few rare instances, by issuing the company's stock to the public. POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:32 PM 80. List and briefly explain the seven "desirable and acquirable attitudes and behaviors" found in Spinelli's and Adams' research on entrepreneurial characteristics. ANSWER: 1. Leadership abilities—The ability to self-motivate and team-build with a focus on honesty in business relationships. 2. Opportunity obsession—A keen awareness of the market and customer needs. 3. Commitment and determination—Tenacity, decisiveness, and persistence in problem solving. 4. Motivation to excel—Goal-orientation and awareness of weaknesses. 5. Courage—Strong moral convictions and a willingness to experiment. 6. Tolerance of risk, ambiguity, and uncertainty—The ability to take risks and to minimize them, as well as to tolerate uncertainty. 7. Creativity, self-reliance, and adaptability—Open-mindedness, resilience, and a quickness to learn. POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:34 PM 81. Identify the six attitudes and behaviors entrepreneurs should avoid. For each, explain the likely result of engaging in that behavior or holding that attitude. (Simply saying "the business will likely fail" is insufficient.) Page 34

ANSWER:

1. Overestimate what you can do. Those who take on too much will find they do not have enough time to perform well in each activity. Something promised may not happen, upsetting customers and/or employees. Setting goals too high and then failing to meet them can be discouraging to the entrepreneur and disappointing to other stakeholders. 2. Lack an understanding of the market. This can lead to an overestimation of revenues and overspending, resulting in cash flow problems. Customers will purchase only those products and services that meet their needs. 3. Hire mediocre people. Customers delight in stellar customer service and better-thanexpected products. Mediocre people turn out mediocre work, which can disappoint customers and cause them to make their next purchases from a competitor. 4. Fail to be a team player. Employees do not enjoy working for prima donnas. Building a business requires commitment from everyone in the organization, including the entrepreneur. Failure to be a team player can drive away the best employees, leaving the entrepreneur with the mediocre workers. 5. Be a domineering manager. It is very easy for the founder to become a micromanager. But the founder must accept that his or her solution is not the only good one. Employees also have good ideas that deserve to be heard. Dominating employees can drive them to the competition, leaving again only the mediocre workers. 6. Fail to share ownership in the business in an equitable way. Those who do the work should reap the rewards. These rewards need not be in the form of stock or partnerships, but some generous recognition of the contribution of key employees is necessary to retain the best.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-2 Small Business and Entrepreneurship Go Together QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:34 PM 82. Explain what social entrepreneurship is. Give an example of a social entrepreneur. ANSWER: Social entrepreneurship is entrepreneurial activity whose goal is to find innovative solutions to social needs, problems, and opportunities.

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE: HAS VARIABLES:

Students' examples of social entrepreneurs will vary. One example that may be listed would be a company that produces non-disposable products to replace paper or plastic, then donates some of their profits to activities that improve the lives of people in underdeveloped countries. 1 Hard 1-2 Small Business and Entrepreneurship Go Together Essay False Page 35

STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Apply | Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:35 PM 83. Identify and explain the four fundamental reasons entrepreneurs own their own businesses. ANSWER: 1. Personal fulfillment. Persons who feel the need to contribute to make a difference in their community by giving back are drawn to entrepreneurship because of this reward. 2. Personal satisfaction. The lifestyle provided by some independent business ventures is inherently enjoyable. 3. Independence. This reward involves a desire to be one's own boss and avoid having others tell one what to do. 4. Financial rewards. Many entrepreneurs are highly motivated by the prospect of making money, and in fact, some entrepreneurs earn lots of money. In general, selfemployed individuals are more likely to create greater personal wealth than persons who work for others. POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:36 PM 84. Briefly summarize the three types of personalities that come into play when a person is starting a business. ANSWER: In his book, The E-Myth Revisited: Why Most Businesses Don't Work and What to Do about It, Michael Gerber describes three personalities that come into play when a person is starting a business: 1. The technician personality. A technician personality focuses on an already developed technical skill, wants to be left alone to get the job done, and is primarily concerned about the present. A technical personality tends to do the following: • Use short-term thinking with little planning for future growth or change. • Be paternalistic. • Define marketing strategy in terms of the traditional components of price, quality, and company reputation. • Be reluctant to delegate. • Focus on sales efforts that are primarily personal. 2. The manager personality. A manager personality is pragmatic and likes order and Page 36

planning operations. A manager personality tends to do the following: • Avoid paternalism. • Delegate authority as necessary for growth. • Employ diverse marketing strategies. • Use different types of sales approaches. • Obtain original financing from more than two sources. 3. The entrepreneur personality. An entrepreneur personality focuses on the business and providing results for the customer. An entrepreneurial personality tends to do the following: • • • •

Ask the question, "How must the business work?" See the business as a system for producing outside results for the customer and, in so doing, producing profits. Start with a picture of a well-defined future, and then attempt to change the present to match the vision. Develop strategies for the business by first seeing the whole picture.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-4 Motivations for Owning a Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:37 PM 85. Explain how a small business can be more innovative than a large firm. ANSWER: Research departments of big businesses tend to focus on improving existing products. Creative ideas may be sidetracked because they are not related to existing products or because they are unusual. Smaller companies do not have these disadvantages. POINTS: 1 DIFFICULTY: Hard REFERENCES: 1-3 Can a Small Company Really Compete with Big Companies? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.01.03 - LO: 1-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/26/2018 1:37 PM Match the term with its definition. Page 37

a. attractive small firm b. corporate refugee c. entrepreneur personality d. high-potential venture (gazelle) e. manager personality f. microbusiness g. niche market h. reluctant entrepreneur i. social entrepreneurship j. technician personality DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together 1-3 Can a Small Company Really Compete with Big Companies? 1-4 Motivations for Owning a Business QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 SMAL.LONG.20.01.03 - LO: 1-3 SMAL.LONG.20.01.04 - LO: 1-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 4:49 PM 86. A person who becomes an entrepreneur to escape an undesirable job situation ANSWER: b POINTS: 1 87. A personality that is pragmatic and likes order and planning operations ANSWER: e POINTS: 1 88. A personality that focuses on an already developed technical skill, wants to be left alone to get the job done, and is primarily concerned about the present ANSWER: j POINTS: 1 89. A specific group of customers with an identifiable but narrow range of product or service interests ANSWER: g POINTS: 1 90. A small firm that provides substantial profits to its owner ANSWER: a POINTS: 1 Page 38

91. Entrepreneurial activity whose goal is to find innovative solutions to social needs, problems, and opportunities ANSWER: i POINTS: 1 92. A small firm that has great prospects for growth ANSWER: d POINTS: 1 93. A person who becomes an entrepreneur because of some severe hardship ANSWER: h POINTS: 1 94. A small firm that provides minimal profits to its owner ANSWER: f POINTS: 1 95. A personality that focuses on the business and providing results for the customer ANSWER: c POINTS: 1 Match the term with its definition. a. bootstrap b. entrepreneur c. entrepreneurial legacy d. entrepreneurial team e. franchisee f. lifestyle business g. intrapreneurship h. paradigm shift i. small business j. technician personality DIFFICULTY: Easy REFERENCES: 1-2 Small Business and Entrepreneurship Go Together 1-4 Motivations for Owning a Business 1-5 What Do You Want Your Legacy to Be? QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.01.02 - LO: 1-2 SMAL.LONG.20.01.04 - LO: 1-4 SMAL.LONG.20.01.05 - LO: 1-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/19/2018 5:04 PM Page 39

96. Material assets and intangible qualities passed on to both heirs and society ANSWER: c POINTS: 1 97. A process within an existing corporation involving an employee who assumes the responsibility for taking a new idea and converting it into a profitable product, service, or a process ANSWER: g POINTS: 1 98. Two or more people who work together as entrepreneurs on one endeavor ANSWER: d POINTS: 1 99. A change in how we fundamentally see a situation ANSWER: h POINTS: 1 100. A person willing to create value, in either a new or an existing business, while assuming both the risks and the reward for his or her efforts ANSWER: b POINTS: 1 101. A business with growth potential that is small compared to large companies in an industry, has geographically localized operations, is financed by only a few individuals, and has a small management team ANSWER: i POINTS: 1 102. An entrepreneur whose power is limited by a contractual relationship with a franchising organization ANSWER: e POINTS: 1 103. A personality that focuses on an already developed technical skill, wants to be left alone to get the job done, and is primarily concerned about the present ANSWER: j POINTS: 1 104. A microbusiness that permits the owner to follow a desired pattern of living ANSWER: f POINTS: 1 105. Doing more with less in terms of resources invested in a business, and, where possible, controlling the resources without owning them ANSWER: a POINTS: 1

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Chapter 02 - Integrity, Ethics, and Social Entrepreneurship 1. Regina sometimes shorts the customer when weighing out bulk merchandise, believing the practice leads to higher profits; therefore, it is acceptable. We could infer that Regina a. lacks integrity. b. is not an entrepreneur. c. cheats on her taxes. d. is skimming. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-1 What Is Integrity? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.01 - LO: 2-1 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 2. Although unethical practices receive extensive attention in the news, most entrepreneurs and other business leaders are people of principle, whose _____ regulates their quest for profits. a. integrity b. self-sacrifice c. synchronous behavior d. loyalty ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-1 What Is Integrity? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.01 - LO: 2-1 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 3. Ethical issues a. seldom involve legal issues. b. involve questions of right and wrong. c. are always clearly defined. Copyright Cengage Learning. Powered by Cognero.

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d. often resolve themselves. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 4. Which of the following is the most frequently observed form of workplace misconduct? a. Abusive behavior b. Lying to employees c. Falsifying time reports or hours worked d. Violations of Internet use policies ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 5. Which of the following would be considered a stakeholder in a business? a. Employees b. The community c. Customers d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Legal Responsibilities Bloom’s: Analyze 8/29/2018 11:20 AM 1/3/2019 4:54 AM

6. Which of the following is NOT one of the four types of responsibilities for small businesses, as identified by business ethics and morality scholar Archie Carroll? a. Economic b. Discretionary c. Legal d. Fiscal ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 7. Of all the possible stakeholders, which of the following are the three primary ones? a. The government, the community, and customers b. Owners, customers, and employees c. Investors, creditors, and employees d. Suppliers, customers, and the community ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 8. A small computer retailer makes every effort to satisfy customer needs both before and after the sale. However, this retailer regards social problems as being beyond the scope of his business. This firm's management has recognized Copyright Cengage Learning. Powered by Cognero.

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a. some degree of social responsibility in its commitment to customers. b. the existence of social responsibilities but having failed to do anything about them. c. ethical obligations to customers but not social responsibilities. d. social responsibility as the domain of big business. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 9. Milton Friedman argued that businesses a. should avoid social responsibility whenever it is possible to do so. b. should be required to use their resources to meet their social responsibilities. c. can only earn profits if they do so in a socially responsible manner. d. are justified in being socially responsible only if doing so enhances the firm's value. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 10. Because a firm has considerable discretion when revealing performance results, financial reports can sometimes be _____ without technically being illegal. a. inaccurate b. misleading c. unreliable d. bellicose ANSWER: b POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 11. Providing support to the community is an example of a(n) _____ responsibility for a small business. a. discretionary b. economic c. ethical d. legal ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 12. When a company delivers an excellent product with first-rate service, _____ and _____ are likely to follow. a. profits; a good reputation b. customer satisfaction; profits c. healthy sales; profits d. customer satisfaction; healthy sales ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:20 AM 12/28/2018 1:16 PM

13. Some experts estimate that one-third of all new businesses fail because of a. employee theft. b. inaccurate financial reporting. c. poor marketing. d. poor community commitments. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 14. Bernard praises his employees as often as he catches someone doing something right. He often hosts family gettogethers for his few employees. Bernard knows a. a little money spent on his employees will be returned many times over in profits. b. happy employees make for satisfied customers. c. this will lead to his employees being more engaged and productive. d. it's a waste of time and money, but he enjoys the camaraderie. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Organizational Behavior TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 15. Clark, the owner of DEF LLC, bragged about hiding company income from the IRS but was surprised when he learned his sales manager was accepting kickbacks from customers. Clark should have remembered a. kickbacks are common in his industry. b. lapses in integrity are passed down from superiors to subordinates. Copyright Cengage Learning. Powered by Cognero.

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c. his sales manager could alert the IRS and Clark could be prosecuted for tax evasion. d. bragging nearly always leads to trouble. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Leadership Principles KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 1/1/2019 2:48 PM 16. Which of the following is an example of an employee acting unethically toward his or her employer? a. Taking a vacation b. Taking unjustified sick leave c. Working overtime d. Taking a 15-minute break ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 17. _____ is the term for when an employee steals money from a firm. a. Cheating b. Fraud c. Embezzlement d. Promotion ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 18. An ethical business not only treats customers and employees honestly but also acts as a good citizen in its community. These broader obligations of citizenship are called a. community commitment. b. philanthropy. c. environmentalism. d. social responsibilities. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 19. Entrepreneurs should think carefully about their community commitments, because building a business on a foundation of "doing good" may add to a small company's a. bottom line. b. financial burden. c. payroll. d. local profile. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

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20. Candace sells the muffins in her bakery at a higher price than the big-box grocery, but she has a steady stream of customers willing to pay what she asks. Candace also supports local charities. What would likely happen if she lowered her prices and stopped her charitable contributions? a. Income taxes would decrease. b. Customers would go elsewhere. c. Business would increase. d. None of these are correct. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 1/3/2019 4:54 AM 21. Research suggests that entrepreneurs who head small, growth-oriented companies may be _____ than CEOs of large corporations. a. more likely to take advantage of customers b. more likely to display lapses in integrity c. less socially sensitive d. less narrowly focused on profits ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 22. Many entrepreneurs feel a duty to give back to the community in return for the local support they enjoy—and they usually benefit from increased _____ as a result. a. publicity b. respect Copyright Cengage Learning. Powered by Cognero.

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c. goodwill d. management expertise ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 23. A band who fails to record the cash they collected for admission to their shows could be charged with a. cash diversion. b. tax evasion. c. skimming. d. payroll tax avoidance. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 24. A firm understating income is guilty of a. bait and switch. b. skimming. c. scaling. d. relativism. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 25. Skimming is an unethical business practice involving a. fraudulent reporting of income for income tax purposes. b. employees taking cash from the cash register. c. sales associates offering gifts and inducements to purchasers. d. managers of competing firms agreeing to charge high prices. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 26. Entrepreneurs often come up short on their tax commitments because of a single-minded focus on their product or service and/or a. casual accounting systems. b. low-cost accounting software. c. an incompetent in-house accountant. d. cash-basis accounting systems. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM Copyright Cengage Learning. Powered by Cognero.

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27. All of the following make up employee payroll tax EXCEPT a. unemployment. b. sales tax. c. Medicare. d. Social Security. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 28. Damon landed his first contract as an entrepreneur and submitted to the local newspaper a news release that gave the impression this was just one of a series of contracts and that business was booming. Damon has a. told a legitimacy lie. b. inflated his income. c. evaded taxes. d. violated the law. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 29. Giving the impression a business is something it is not is a. ingenious and resourceful. b. illegal. c. acceptable so long as no one is hurt by the transactions. d. a way to manipulate customers. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 30. PRO factors include a. products, resources, and outputs. b. products, representatives, and the organization. c. people, resources, and outputs. d. performance, relationships, and options. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 31. When Evelyn hired a new sales manager, she issued a press release emphasizing the new hire's educational background and industry experience because a. she wanted to introduce the sales manager to the community. b. this was her first new hire and she wanted everyone to know her business was expanding. c. she had stolen the sales manager from a competitor and wanted to gloat publicly. d. she wanted to highlight and bolster the credibility of the sales manager. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Ethical Responsibilities Bloom’s: Apply 8/29/2018 11:20 AM 12/28/2018 1:16 PM

32. An effective way for an entrepreneur to establish legitimacy is to a. hire experienced employees from competitors. b. insist on professional behavior from all employees. c. communicate the company's mission clearly and frequently. d. outperform the competition by underbidding and overpromising. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 33. A poll by an online media company found that more than 80 percent of Web users worry about a. how well their personal information is being protected. b. whether the content of a website is truthful. c. phishing scams. d. hacking. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 34. A digital ID tag that collects data on consumers' buying habits related to a particular Internet address is known as a a. cookie. b. bot. Copyright Cengage Learning. Powered by Cognero.

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c. spider. d. contact signature. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 35. Which of the following would NOT be an example of "cyberslacking" at work? a. Shopping online b. Surfing the Internet c. Making personal phone calls d. Checking personal e-mail ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 36. If Floyd elects to monitor the Internet use of his employees at work, he should a. install tracking software on each company computer. b. first develop a carefully worded and legally sound policy, and then ensure all employees are aware of it. c. consult an attorney before terminating an employee for surfing the Internet at work. d. use URL blocks to stop employees from surfing the Internet. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 37. An eBay retailer selling counterfeit Gucci and Louis Vuitton handbags is in violation of laws related to a. Internet fraud. b. intellectual property. c. bait-and-switch marketing. d. ethical imperialism. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 38. If a student copies a favorite CD and gives it away to a friend to use, the student is engaged in the theft of _____ property. a. collective b. intangible c. intellectual d. real ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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39. The saying "When in Rome, do as the Romans do" reflects a philosophy of ethical a. insensitivity b. elitism c. imperialism d. relativism ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Diversity TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 40. A U.S. manager is upset with the company's overseas representative for paying a small "access fee" to a local customs official to ensure the expedited release of a customer order. The manager's belief such payments are wrong reflects a sense of a. cultural insensitivity. b. ethical elitism. c. ethical imperialism. d. cultural integrity. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 41. Which of the following statements about the Foreign Corrupt Practices Act is true? Copyright Cengage Learning. Powered by Cognero.

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a. It makes it illegal for foreign businesses to use bribery in their dealings in the United States. b. It makes it illegal for U.S. businesses to use bribery in their dealings anywhere in the world. c. It makes it legal for U.S. businesses to use bribery in their dealings anywhere in the world. d. It makes it legal for U.S. businesses to use bribery in their dealings only in countries where bribery is legal. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 42. Which of the following is NOT one of the long-term benefits of adopting ethical and responsible business practices, as suggested by the advocacy group Business for Social Responsibility? a. Improved supply chain management b. Improved productivity and quality c. Improved access to capital d. Better recruitment and reduced employee turnover ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 43. The advocacy group Business for Social Responsibility contends that which of the following is a long-term benefit of ethical and responsible business practices? a. Improved financial performance b. Ironclad customer loyalty c. Increased customer turnover d. Fewer regulatory citations ANSWER: a POINTS: 1 DIFFICULTY: Hard Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 44. The business practices that a firm's leaders and employees view as right or wrong reflect their a. ethical imperialism. b. underlying values. c. belief system. d. code of ethics. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 45. Perhaps the greatest benefit of integrity in business is the _____ it generates. a. trust b. profit c. reputation d. sales ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM Copyright Cengage Learning. Powered by Cognero.

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46. In a small organization, the ethical influence of a leader is a. relatively minor. b. overpowered by profit concerns of stockholders. c. less important than the views of others within the firm. d. more pronounced than it is in a large corporation. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Leadership Principles KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 47. In a small organization, a(n) _____ has much greater influence on employees than _____ does. a. code of ethics; a leader's behavior b. leader's behavior; his or her stated philosophy c. ethics training program; the leader's stated philosophy d. code of ethics; the amount of legislation affecting the organization ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Leadership Principles KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 48. In their highly influential book The Power of Ethical Management, Kenneth Blanchard and Norman Vincent Peale suggest that an ethics policy be based on all of the following fundamental principles EXCEPT a. patience. b. pride. c. profit. d. perspective. ANSWER: c POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 1/1/2019 2:49 PM 49. A code of ethics becomes increasingly appropriate and necessary as a small business a. expands its credit sales and acquires more customers who buy on credit. b. begins to market products in other countries. c. grows with a consequent lessening of personal interactions between the owner and employees. d. increases borrowing to the extent that one third of its assets are financed by borrowing. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 50. A survey of MBA students employed by small and medium-size companies revealed that codes of ethics shape and improve conduct in their organizations by a. defining behavioral expectations. b. providing a formal channel for communicating with superiors without fear of reprisal. c. serving as a guide for handling peer pressure. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM Copyright Cengage Learning. Powered by Cognero.

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51. In drawing up a code of ethics, an entrepreneur should adopt a code a. provided by the Ethics Resource Center of Washington, D.C. b. that outlines principles to be followed by employees of the firm and give examples of these principles in action. c. that highlights expected employee behavior, regardless of whether or not that behavior is consistent with the entrepreneur's own stated principles. d. suggested by the Better Business Bureau. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 52. The purpose of Better Business Bureaus is to a. provide an outlet for customer complaints about a business. b. promote ethical conduct on the part of all businesses in a region. c. report relevant information to law enforcement agencies. d. impose penalties on companies that engage in unethical business practices. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 53. What is the best place to start your search for a solution to a challenging ethical problem? a. Identify as many solutions as possible to the problem. b. Look at the surface of the problem. c. Identify the root of the problem. d. None of these are correct. ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 1/3/2019 4:55 AM 54. Perhaps the most widely recommended principle for ethical behavior is to do what a. is best for yourself. b. will yield the most profits. c. you would want others to do for you. d. will reduce product prices. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 55. When evaluating alternatives, the entrepreneur will select one that builds goodwill, is beneficial to all parties, is fair, and is a. exploitable. b. publishable. c. truthful. d. repeatable. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Remember 8/29/2018 11:20 AM 12/28/2018 1:16 PM

56. Marathon Sporting Goods recently received an award for its outstanding customer service and its dedication to using eco-friendly practices. Marathon's dedication to its customers and the environment is an example of a. a sustainable small business. b. ethical relativism. c. social entrepreneurship. d. ethical imperialism. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 57. Michaela is using the Ethics Resource Center's decision-making process to resolve an ethical dilemma. She has identified all the solutions to her problem. What is Michaela's next step? a. Choose a solution as quickly as possible, as time is of the essence. b. Evaluate each of the identified alternatives. c. Choose an "obvious" solution that has been used in the past. d. Discard any "off-the-wall" solutions. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 12/27/2018 7:55 PM DATE MODIFIED: 12/28/2018 1:16 PM 58. Which of the following types of business would be the most adversely affected by new environmental protection Copyright Cengage Learning. Powered by Cognero.

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laws? a. Medical waste disposal operations b. Drugstores c. Movie theaters d. Liquor stores ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 59. An example of a business adversely affected by environmental protection laws would be a a. glass manufacturer. b. military contractor. c. fast-food restaurant. d. fast lube and oil change center. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 60. An example of a small business that actually benefits from the growing interest in environmentalism would be a(n) a. fast lube and oil change center. b. producer of ethanol from farm waste. c. self-service car wash. d. asbestos removal service. ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 61. A baker looking for new retail space has returned from a seminar on environmentalism and wishes to act responsibly in this area. Which action will best accomplish this purpose? a. Looking into leasing a LEED-certified space b. Reducing product prices c. Eliminating undesirable processing odors d. Increasing service to customers ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 62. U.S. government assistance is available to lead the entrepreneur in compliance with environmental law through the a. Small Business Administration. b. Department of Energy. c. Department of Commerce. d. Department of the Interior. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 63. Refusing to pay a bribe even though it is a common practice in the country one is doing business in is an example of a. cultural relativism. b. social entrepreneurship. c. integrity. d. sustainability. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Diversity TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 64. Millicent, founder of a small company that markets baked goods made from organic ingredients, emphasis honesty in all transactions. In this respect, Millicent acts with _____. ANSWER: integrity POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-1 What Is Integrity? QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.01 - LO: 2-1 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Leadership Principles KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 65. Among the many _____ of any small business are owners, customers, employees, the community, and the Copyright Cengage Learning. Powered by Cognero.

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government. ANSWER: stakeholders POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 66. A recent Ethics Resource Center survey indicated that employees witness various forms of misconduct in their workplaces, with the most frequently observed offenses involving _____ and _____. ANSWER: abusive behavior; lying to employees POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 67. Owners, customers, and employees are considered to be the _____ of a business. ANSWER: primary stakeholders POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

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68. Milton Friedman believed the only _____ of a business is to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game. ANSWER: social responsibility POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 1/1/2019 3:21 PM 69. Salespeople often must walk a fine line between _____ and _____. ANSWER: persuasion; deception POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 1/1/2019 4:40 PM DATE MODIFIED: 1/1/2019 4:41 PM 70. Malcolm creates a positive work environment and rewards his employees generously for their contributions. Malcolm is exercising integrity by _____ his employees. ANSWER: valuing POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Leadership Principles Bloom’s: Apply 8/29/2018 11:20 AM 12/28/2018 1:16 PM

71. Rhoda, the bookkeeper for a small company, has been diverting company funds into her personal bank account. Rhoda is engaging in _____. ANSWER: embezzlement POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 72. Tyrone gives 1 percent of the profits of his company to local organizations like the Little League and the Boys and Girls Club. In this way, Tyrone is fulfilling his _____. ANSWER: social responsibilities POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 73. Entrepreneurs should think carefully about their community commitments, because building a business on a foundation of "doing good" may add to a small company's _____. ANSWER: financial burden POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 74. Ralph has vending machines on his business property for the convenience of his employees. He reports on his income tax form only half the cash collected by these machines. The rest is hidden in Ralph's personal account. This practice is an example of _____. ANSWER: skimming POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 75. Sometimes Vincent doesn't have enough cash on hand to send in the monthly taxes withheld from his employees’ paychecks. This could be the result of a single-minded focus on production or because of a casual _____. ANSWER: accounting system POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM Copyright Cengage Learning. Powered by Cognero.

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76. Widespread use of the Internet has focused attention on the issue of protecting _____. ANSWER: intellectual property POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 77. William wants everyone to think his business is growing faster than it actually is so he built an impressive website with an exaggerated company history. His efforts to mislead are known as _____. ANSWER: legitimacy lies POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 78. Entrepreneurs would do well to remember that customers who have questions about the _____ (products, representatives, and the organization) are less likely to make purchases. ANSWER: PRO factors POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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79. Richard believes the United States is the greatest nation on earth and that all other countries should subscribe to our system of democracy and human rights. Therefore, he expects his overseas sales representatives to follow American business practices. This is an example of _____. ANSWER: ethical imperialism POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Diversity TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 80. Carlos understands that cultures develop different standards and practices that govern how business is conducted. He is careful to observe local customs when he interacts with foreign companies. Carlos is practicing _____. ANSWER: ethical relativism POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Diversity TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 81. Franco treats his customers with respect. He is always truthful, even if it means losing a sale. He uses high-quality materials and careful craftsmanship. If he can't meet a customer's deadline, he says so. His customers appreciate his integrity, which has helped to build _____ between them and Franco. ANSWER: trust POINTS: 1 DIFFICULTY: Hard Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 82. When her employees review a situation, they sometimes ask themselves, "What would Marcella do in this situation?" They know her _____ provide a foundation for ethical behavior and serve as a guide for their own decisions. ANSWER: underlying values POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 83. As her business grew, Gretchen could not spend as much time individually with her employees. She wanted to make sure her values and beliefs permeated the entire organization, so she prepared a _____ for distribution to all her employees so everyone could follow the same guiding principles. ANSWER: code of ethics POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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84. The purpose of _____ is to promote ethical conduct on the part of all businesses in a region. ANSWER: Better Business Bureaus POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 85. Rotary Club International calls on its members to ask the following four questions when they prepare to make a decision about the things they think, say, or do: 1. Is it the _____? 2. Is it _____ to all concerned? 3. Will it build _____ and better friendships? 4. Will it be _____ to all concerned? ANSWER: truth; fair; goodwill; beneficial POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 86. The triple bottom line sought by the social entrepreneur includes three outcomes of interest: people, profits, and the _____. ANSWER: planet POINTS: 1 DIFFICULTY: Easy REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Completion HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 87. Waverly Corporation ensures the temperature of water released back into the river is the same temperature as water drawn from the river for its production needs. It does the same for its exhausted air. Its products are made with a minimal environmental impact and it has won many awards in its industry. Waverly Corporation is an example of a(n) _____. ANSWER: sustainable small business POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 88. PQR Company promotes its practice of using only recycled and recyclable materials in its products. In the customer waiting area, recycle bins are available for plastic, glass, and aluminum drink containers. PQR is committed to the cause of _____, an effort to protect and preserve the environment. ANSWER: environmentalism POINTS: 1 DIFFICULTY: Moderate REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 89. The philosopher Immanuel Kant introduced the so-called _____, a sophisticated way of asking, "How would it be if Copyright Cengage Learning. Powered by Cognero.

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everyone decided to do what you intend to do?" ANSWER: categorical imperative POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 90. Small businesses are learning that sustainable business practices can hold down _____, attract _____, and generate value for _____. ANSWER: costs; customers; shareholders (or owners, investors, stockholders) POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Completion HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 91. How can integrity and financial success be related? Use an example to strengthen the argument. ANSWER: A successful entrepreneur seeks financially rewarding opportunities while creating value, first and foremost, for prospective customers and the firm's owners. This perspective makes clear that relationships are critical and integrity is essential to success. Financial gain is important, but it should not be the only goal. Acting with integrity requires that an individual first consider the welfare of others. Fortunately, many small business owners strive to live up to the highest standards of honesty, fairness, and respect in their business relationships. Most entrepreneurs and other business leaders are people of principle, whose integrity regulates their quest for profits. Student examples will vary. POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-1 What Is Integrity? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.02.01 - LO: 2-1 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 92. Explain how integrity applies to various stakeholder groups, including owners, customers, employees, the community, and the government. ANSWER: When it comes to ethical behavior, small business owners guided by integrity must consider the interests of several different groups when making decisions. These groups include owners (or stockholders), customers, employees, the community, and the government, among others. Many businesses, even small ones, have more than one owner. When this is the case, high standards of integrity require an honest attempt to promote the interests of all the owners, which include a commitment to financial performance and protection of the firm's reputation. Though entrepreneurs should be able to make their own decisions about personal matters, they have an obligation to make choices that protect the financial investment of other owners in the company. Customers are obviously central to the purpose of any firm, and this has implications for business integrity. Owners who take customers seriously and care about them as individuals are apt to have more of them—and those customers are likely to return often. A firm's integrity is also expressed by the value it places on employees. Through management decisions, an owner affects employees' personal and family lives. Issues of fairness, honesty, and impartiality are inherent in decisions and practices regarding hiring, promotions, salary increases, dismissals, layoffs, and work assignments. Employees are also concerned about privacy, safety, and health issues, and these should not be ignored. Many entrepreneurs recognize the importance of looking after the needs of their employees, creating a positive work environment, and rewarding them generously for their contributions. According to recent research, when employees feel that they are valued and socially connected at work, they tend to be highly engaged and much more productive. Employees who are loyal to the business naturally devote themselves to their work, which leads to highquality service, very loyal customers, and, ultimately, increased profits. Lapses in integrity are passed down from superiors to subordinates, replicating like a life-threatening virus that spreads throughout the organization. As this influence expands, employees of small firms may face pressure from various sources to act in ways that conflict with their own sense of what is right and wrong. Such situations are guaranteed to spawn an organizational culture that erodes integrity.

POINTS:

An ethical business also acts as a good citizen in its community. These broader obligations of citizenship are called social responsibilities. Companies have increasingly shown commitment to the communities where they do business. Their contribution starts with creating jobs and adding to local tax revenues, but many entrepreneurs feel a duty to give back even more to the community in return for the local support they enjoy—and they usually benefit from increased goodwill as a result. Building a business on a foundation of "doing good" results in increased loyalty from customers and employees who buy into the mission, which leads to improved productivity and morale. It also sets a company apart from competitors that offer similar products or services but make no charitable contributions. Perhaps most important, this commitment is often rewarded by customers in two ways— repeat sales and a willingness to pay a little more for what they get. 1

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DIFFICULTY: Hard REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 93. What are legitimacy lies? What effect may these have on a business? ANSWER: Because startups do not have a history and a reputation to lean on when trying to sell customers on their new product or service or to impress other important stakeholders, entrepreneurs often are uniquely tempted to resort to telling what some researchers call legitimacy lies. That is, they sometimes misrepresent the facts or create false impressions to mislead others intentionally and earn their confidence. Telling legitimacy lies threatens the reputation of the business and the trust that goes along with it. If (when) the truth is revealed, future sales or support could very well be compromised. It would be better—and much more honest—to understand the factors that move customers to have confidence in a purchase and to provide truthful information. POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 94. Discuss the relationship between profits and social responsibility in the small firm. ANSWER: Research suggests that entrepreneurs who head small, growth-oriented companies

may be more narrowly focused on profits and therefore less socially sensitive than CEOs of large corporations. With simple survival as the most pressing priority, many small firms see social responsibility as a luxury they simply cannot afford. Earning a profit is absolutely essential, after all, and meeting the expectations of society can be expensive. But small business philanthropy often takes place anyway, only in the form of personal contributions by business owners. Fortunately, many types of socially responsible actions can be consistent with a firm's long-term profit objective. A National Federation of Independent Business study found that 91 percent of small businesses made contributions to their communities Copyright Cengage Learning. Powered by Cognero.

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through volunteering, in-kind assistance, and/or direct cash donations. The same study reported 74 percent of all small business owners volunteered for community and charitable activities, and the average commitment was just over 12 hours per month. Overall, the evidence on performance impact is far from certain, but it suggests that taking social responsibilities seriously may very well be good for business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-2 Integrity and the Interests of Major Stakeholders QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.02 - LO: 2-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 95. Describe the five fundamental principles that an ethics policy should address. ANSWER: In their highly influential book The Power of Ethical Management, Kenneth Blanchard and Norman Vincent Peale offer insights to guide the development of an ethics policy. They suggest that the policy be based on the following five fundamental principles: 1. Purpose. The vision for the company and its core values should guide business conduct. 2. Pride. When employees take pride in their work and their company, they are much more likely to be ethical in their dealings. 3. Patience. Pushing others too hard for short-term results may cause unethical actions sooner or later as it will seem to be the only way to achieve those outcomes. 4. Persistence. People should stand by their word, as it is the foundation of trust. If the company is not committed to an ethical framework, personal integrity is at risk, as is the reputation of the company. 5. Perspective. Stopping from time to time to reflect on where the business is going, why it is going that way, and how to plan to get there will allow more confidence that the company is on the right track now and will continue to be in the future. POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

12/28/2018 1:16 PM

96. List the six-step decision making process in order and comment on each of the steps in resolving ethical issues. ANSWER: Step 1: Define the problem. How one defines the problem will guide where one looks for the solutions. Looking for the root of the problem is the best place to start in the search for a solution to a challenging ethical problem. Step 2: Identify alternative solutions to the problem. Be open-minded, and consider creative alternatives rather than just the most obvious solution or one that has been used in the past. Step 3: Evaluate the identified alternatives. Perhaps the most widely recommended principle for ethical behavior is simply to follow the Golden Rule: "Treat others as you would want to be treated." Following this principle can be a very practical way for an entrepreneur to evaluate ethical decisions and guard his or her integrity. Step 4: Make the decision. Choose the "best" ethical response based on an evaluation of all possible alternatives, always keeping the vision and core values firmly in mind. Step 5: Implement the decision. Entrepreneurs sometimes put off responding to ethical challenges, but avoiding action on the decision may allow a small problem to grow into a major crisis. Step 6: Evaluate the decision. Has the situation improved, gotten worse, or stayed about the same? Has the solution created ethical issues of its own? Has information come to light indicating that the decision was not the most ethical course of action? The matter may need to be reopened to make things right. POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-4 Building a Business with Integrity QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.04 - LO: 2-4 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 97. Using examples, discuss how environmentalism can have both a positive and negative impact on different companies. ANSWER: Many small business owners are committed to the cause of environmentalism, and in many cases, this emphasis makes sound financial sense. For example, companies can actually save money by buying or leasing LEED-certified buildings, a stamp of approval granted only to those facilities that have been built to strict standards promoting energy and water conservation, reduced CO2 emissions, and improved indoor air quality. Though more expensive to construct, such buildings can decrease energy costs from operations by as much as 20 percent, and healthier workplace environments improve employee productivity, reduce illness and absences, improve recruitment, and raise retention—all of which can create a net savings for the company. However, some firms are very adversely affected by new environmental protection laws. Businesses such as fast lube and oil change centers, medical waste disposal operations, and self-service car washes have been especially hard hit by these expanding regulations. The costs can be punishing, forcing many struggling firms, especially those with limited resources and older equipment that may need to be upgraded, to close. Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 98. Describe PRO factors and how these factors relate to customers. ANSWER: Research has shown that customers are less likely to decide to purchase if they have significant questions about the product or service that the new venture is offering, about those who represent and/or run the business, and about the organization itself. These features are called PRO factors—Products, Representatives, and the Organization—to emphasize that they can promote firm performance when customers are satisfied with them. The concerns of customers include the following: • • •

Will the product (or service) serve my needs better than alternatives, and will it be a hassle to change from the brand I currently buy? Do the company's representatives know what they are talking about, and will they (can they) live up to their assurances? Will the organization still be around to stand behind its product or service if I have a problem with it six months from now?

These are all reasonable concerns, and it is important that the new venture find a way to address them. POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM 99. Discuss the issues related to Internet usage and personal privacy from both a business perspective and an employee and a customer standpoint. What should a small business do to decrease conflict? ANSWER: The issues center around privacy and monitoring usage. Businesses and consumers often disagree about how private the identity of visitors to websites should be. For example, businesses can use cookies (digital "ID tags") to collect data on consumers' buying habits related to a particular Internet address. In this way, a business can create a detailed profile of Copyright Cengage Learning. Powered by Cognero.

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customers, which it may then sell to media-buying companies and other interested groups. While the collection of personal information may allow a business to create a more personalized shopping experience and offer convenience to the buyer, it also opens the door to potential misuse of data. To minimize customer concerns, a company must be honest and transparent with customers about its practices and draft a privacy policy that conforms to the guidelines provided by organizations like the Better Business Bureau or through consultation with an attorney. Privacy issues concern more than just online companies. The extent to which an employer may monitor an employee's Internet activity is also hotly debated. Many workers believe it is inappropriate for employers to monitor their e-mail, a practice they consider to be an invasion of privacy. Employers, on the other hand, are concerned that employees may be engaging in "cyberslacking" at the office—that is, wasting company time dealing with personal e-mail, shopping online, and surfing the Internet. Many employers are convinced such activity hinders workplace productivity and thus are taking steps to do something about it. An increasing number of small businesses are installing software to monitor Internet use. Companies that choose to do this should be sure to develop a carefully worded and legally sound policy first, and then ensure that all employees are aware of it. Those choosing to take an even more cautious approach have employees sign a monitoring consent form when they are first hired. Taking such measures is very practical—it helps head off costly legal challenges—and it also communicates the firm's respect for its employees and its sound commitment to high standards of integrity. POINTS: 1 DIFFICULTY: Hard REFERENCES: 2-3 The Challenges and Benefits of Acting with Integrity QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.02.03 - LO: 2-3 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Analyze | Bloom’s: Understand DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 12/28/2018 1:16 PM

Match the term with its definition. a. code of ethics b. environmentalism c. ethical imperialism d. ethical relativism e. integrity f. intellectual property g. social entrepreneurship h. social responsibilities i. stakeholders j. sustainable small business k. underlying values DIFFICULTY: Easy REFERENCES: 2-1 What Is Integrity? Copyright Cengage Learning. Powered by Cognero.

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2-2 Integrity and the Interests of Major Stakeholders 2-3 The Challenges and Benefits of Acting with Integrity 2-4 Building a Business with Integrity 2-5 Social Entrepreneurship: A Continuing Trend QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.02.01 - LO: 2-1 SMAL.LONG.20.02.02 - LO: 2-2 SMAL.LONG.20.02.03 - LO: 2-3 SMAL.LONG.20.02.04 - LO: 2-4 SMAL.LONG.20.02.05 - LO: 2-5 NATIONAL STANDARDS: United States - BUS PROG: Ethics TOPICS: Ethical Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:20 AM DATE MODIFIED: 1/1/2019 3:35 PM 100. The belief that ethical standards are subject to local interpretation ANSWER: d POINTS: 1 101. A company's ethical obligations to the community ANSWER: h POINTS: 1 102. Beliefs that provide a foundation for ethical behavior in an individual or a firm ANSWER: k POINTS: 1 103. The belief that the ethical standards of one's own country can be applied universally ANSWER: c POINTS: 1 104. A general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless of the circumstances ANSWER: e POINTS: 1 105. Individuals or groups that either can affect or are affected by the performance of the company ANSWER: i POINTS: 1 106. The effort to protect and preserve the environment ANSWER: b POINTS: 1 107. Original intellectual creations, including inventions, literary creations, and works of art, that are protected by patents, copyrights, trademarks, design rights, and trade secrets ANSWER: f Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 108. A profitable company that responds to customers' needs while showing reasonable concern for the environment ANSWER: j POINTS: 1 109. Formally established standards of employee behavior communicated by a business owner ANSWER: a POINTS: 1

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Chapter 03 - Starting a Small Business 1. Many businesses are formed because an entrepreneur saw possibilities for improving or modifying an existing product or service as a result of prior work experience. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 2. Research has revealed that startups based on a personal pastime are less likely than others to generate early sales and reach profitability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 3. Serendipity describes a new product idea resulting from deliberate search activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 4. Fads can lead to serious, though sometimes short-lived, money-making opportunities, but trends provide a much stronger foundation for businesses because they are connected to a larger change in society. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 5. The general environment includes rival companies and products. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 6. An inside-out analysis identifies a company's strengths and the competition's weaknesses. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 7. Using a cost-based strategy, a company would take steps to increase efficiency and hold down costs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 8. Only cost-based strategies should be used when focusing on a market niche. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:21 AM 12/29/2018 5:32 PM

9. When screening new business ideas, the entrepreneur need not focus on the size of the targeted market. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-5 Screening New Business Ideas QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.05 - LO: 3-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 10. The best business ideas will meet a definite market need and have no fatal flaws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-5 Screening New Business Ideas QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.05 - LO: 3-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 11. _____ refers to the identification of new products or services that may lead to promising businesses. a. Focus-based decision making b. Elasticity c. Opportunity recognition d. Cost-benefit analysis ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-0 Starting a Small Business Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 12. Katarina has founded three different businesses in the past eight years, all of which have become so successful she has sold them at large profits. We can say Katarina is good at a. innovative ideas. b. entrepreneurial alertness. c. new market ideas. d. opportunity recognition. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-0 Starting a Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 13. Economist Israel Kirzner proposed that entrepreneurs have a unique capability, which he called _____, to recognize existing opportunities for businesses. a. innovative thinking b. market awareness c. entrepreneurial alertness d. opportunity recognition ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-0 Starting a Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Remember 8/29/2018 11:21 AM 12/29/2018 5:32 PM

14. A computer technician recognizing a need for more aesthetically pleasing computers would be said to have entrepreneurial a. technology. b. alertness. c. strategy. d. rivalry. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-0 Starting a Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 3:43 PM 15. Isabella listens whenever someone says "Someone ought to make a ...." She expects one of these ideas to develop into a profitable business. Isabella possesses a. market awareness. b. entrepreneurial alertness. c. opportunity recognition. d. innovative thinking. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-0 Starting a Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 16. Janis wants to open a restaurant. She is not interested in a franchise; she wants to build her business literally from the ground up. When she does, her business will be classified as a(n) Copyright Cengage Learning. Powered by Cognero.

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a. entrepreneurial opportunity. b. startup. c. new market idea. d. serendipity. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-0 Starting a Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 17. Consuela noticed significant growth in the Hispanic population in her mid-size town. The local grocery carried mostly traditional American products. She knew her neighbors would want familiar foods, so she decided to open a food market catering to their preferences. Consuela's startup is based on a new _____ idea. a. market b. technology c. benefit d. product ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 18. When Jeff Bezos launched Amazon, his idea of selling items he did not own from a website was unique. Which type of idea was Amazon based on? a. New market idea b. New technology idea c. New benefit idea d. New product idea ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 19. According to a study by the National Federation of Independent Business (NFIB), the most common source of new ideas for small business startups is a. prior work experience. b. hobbies and personal interests. c. a chance happening. d. existing records of a business. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 20. Jeff Bezos' original business plan for Amazon involved taking orders for books and having the items shipped directly from the publisher to the customer. He modified the plan to include other products such as toys and decided to buy the toys from the producers and ship them from his own warehouse. This modification of the original plan is called a a. change of plan. b. pivot. c. serendipity. d. competitive move. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 21. Laura discovered to her amazement that the skin oil she sold seemed to repel mosquitos. She relabeled the product and began selling it as alternative to brands such as Cutter and Off. Laura's startup is based on a new _____ idea. a. market b. technology c. benefit d. product ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 22. Verlin worked in a cabinet shop until he became frustrated that his ideas for improving efficiency were falling on deaf ears. So he left and started his own cabinet shop where he could implement those ideas. From which of the following sources did his ideas for his startup come? a. Hobbies and personal interests b. A chance happening c. Accidental discovery d. Work experience ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:21 AM 12/29/2018 5:32 PM

23. Which of the following is an example of an idea for a new startup coming from a hobby? a. A coin collector, who bought and sold coins for years to build a personal collection, decides to become a coin dealer. b. A furniture salesperson sees the possibility of opening a new furniture store in a different area of the city. c. A sharpshooter, who shot holes in a pair of her boyfriend's jeans during an argument, hears him get complimented on the way the jeans look. d. A local restaurant owner, noticing the success of food trucks selling crepes with unique toppings, incorporates the items into his menu. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 24. Carol enjoyed yarn crafts, but there were no yarn shops in her small town. She reasoned that there were many others nearby who might appreciate being able to purchase yarns and supplies without a long drive. Within a year her shop was profitable and expanding into larger space. Which of the following statements best describes this situation? a. Carol grew a business out of her personal experience. b. Carol turned her hobby into a thriving business. c. Carol accidentally stumbled upon a gold mine. d. Carol used her work experience as a source of startup ideas. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 25. Wilma needed wine glasses, but all she had were candlestick holders and 8-ounce canning jars. Gluing the two Copyright Cengage Learning. Powered by Cognero.

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together, she created what she called "mountain crystal" which became a big hit. The local crafters' association asked her to make enough for them to sell, and her business took off. This is an example of building a business from a. work experience. b. a hobby. c. a personal interest. d. accidental discovery. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 26. Which of the following is an example of an idea for a new startup coming from an accidental discovery? a. A coin collector, who bought and sold coins for years to build a personal collection, decides to become a coin dealer. b. A furniture salesperson sees the possibility of opening a new furniture store in a different area of the city. c. A sharpshooter, who shot holes in a pair of her boyfriend's jeans during an argument, hears him get complimented on the way the jeans look. d. A local restaurant owner, noticing the success of food trucks selling crepes with unique toppings, incorporates the items into his menu. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 27. The quote "Good artists borrow; great artists steal" is the principle that launched which of the following companies? a. Tesla, Inc. b. Apple Computer c. Amazon Copyright Cengage Learning. Powered by Cognero.

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d. Xerox ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 28. Richard could see the demand for towable recreational vehicles declining, so beginning in the early 1970s he used his equipment, employees, and professional network to design and build utility trucks—a more recession-resistant industry. This is an example of a. serendipity. b. diversification. c. innovative thinking d. pivoting. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 29. Drs. James and Janet Baker saw that many people experienced difficulty and frustration when typing, particularly from physical disabilities, so they invented a voice recognition software to allow users to talk to the computer. Their idea resulted in Dragon NaturallySpeaking, a popular talk-to-type software application. Which of the following suggestions for generating business ideas describes how the Bakers conceived their startup? a. Borrow from existing product and service ideas. b. Combine two businesses to create a market opening. c. Begin with a problem in mind. d. Recognize a popular trend, and ride the wave. ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 30. Julie, owner of a bed and breakfast inn, had been asked repeatedly to cater events. Once she realized her kitchen was not being used during the latter part of the day, she started the company. This change is an example of a. recognizing a popular trend, and riding the wave. b. combining two businesses into one to create a market opening. c. beginning with a problem in mind. d. cashing in on the sharing economy. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 31. Because many commuters grab a cup of coffee and drink it during their ride to work, someone invented specially shaped cups that don't tip and lids with sip openings that close and don't spill. Which of the following innovative ways of thinking best fits this situation? a. Combine two businesses to create a market opening. b. Offer a "green" product or service alternative. c. Recognize a popular trend, and ride the wave. d. Improve the function of an existing product or service. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 32. When Sally realized her vintage clothing pieces were being bought by the local college students and not just their parents, she started adding more vintage pieces to her inventory. Sally is a. recognizing a popular trend, and riding the wave. b. combining two businesses to create a market opening. c. beginning with a problem in mind. d. adapting a product or service to meet customer needs in a different way. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 33. Angela noticed an interest among her friends and colleagues in wearing high-end watches and other jewelry for special occasions, so she started a company where customers could rent high-end jewelry. Angela is a. adapting a product or service to meet customer needs in a different way. b. offering products through a subscription service. c. cashing in on the sharing economy. d. beginning with a problem in mind. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM Copyright Cengage Learning. Powered by Cognero.

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34. Alyson and Andrea, country artists, realized that their love of classic rock was also popular with their fans. Their change to their show to incorporate more rock songs with a country flavor is an example of a. recognizing a popular trend, and riding the wave. b. combining two businesses to create a market opening. c. beginning with a problem in mind. d. adapting a product or service to meet customer needs in a different way. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 35. Two general approaches that can help identify business ideas are _____ and _____ analyses. a. outside-in; inside-out b. industry; competitive c. upside-down; inside-out d. upward; downward ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 36. Which of the following statements is an example of an economic trend? a. The Federal Reserve announces that it will decrease the interest rate charged to banks. b. Congress passes legislation that increases the tax rate on corporations. c. A new computer chip is developed that will allow for miniaturization of many electronic devices. d. The European Union declares an increase in tariffs on all agricultural goods. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 37. For the past several years, the borrowing interest rates have been very low in the United States. This is an example of a(n) _____ trend. a. economic b. sociocultural c. political/legal d. demographic ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 3:44 PM 38. Which of the following statements is an example of a political/legal trend? a. The Federal Reserve announces that it will decrease the interest rate charged to banks. b. Congress passes legislation that increases the tax rates on corporations. c. A new computer chip is developed that will allow for miniaturization of many electronic devices. d. The European Union declares an increase in tariffs on all agricultural goods. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUS PROG: Reflective Thinking Environmental Influence Bloom's: Analyze 8/29/2018 11:21 AM 12/29/2018 5:32 PM

39. Which of the following statements is an example of a technological trend? a. The Federal Reserve announces that it will decrease the interest rate charged to banks. b. Congress passes legislation that increases the tax rates on corporations. c. A new computer chip is developed that will allow for miniaturization of many electronic devices. d. The European Union announces an increase in tariffs on all agricultural goods. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 40. All of the following are trends in the general environment EXCEPT a. demographic trends. b. strategic trends. c. global trends. d. sociocultural trends. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 41. The increased trade between the United States and Mexico since the enactment of the North American Free Trade Agreement (NAFTA) is an example of a(n) _____ trend in the general environment. Copyright Cengage Learning. Powered by Cognero.

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a. technological b. global c. ecological d. sociocultural ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 42. Which of the following statements is an example of a global trend? a. The Federal Reserve announces that it will decrease the interest rate charged to banks. b. Congress passes legislation that increases the tax rates on corporations. c. A new computer chip is developed that will allow for miniaturization of many electronic devices. d. The European Union declares an increase in tariffs on all agricultural goods. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 43. An evaluation of the general environment a. is done before the feasibility analysis. b. can benefit small businesses as well as large firms. c. will clarify the unique value of the startup idea. d. is appropriate only for large firms that have corporate staffs to manage the process. ANSWER: b POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 44. The business idea screening process takes which of the following merits of an idea into account? a. Customer diversity b. Capital requirements and venture performance c. Uniqueness of strategy d. Demographics of proposed market ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-5 Screening New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.05 - LO: 3-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 45. If a startup budget is tight, a business idea's promise is likely to be determined by the entrepreneur's ability to a. hire competent employees. b. grow quickly. c. test market reactions to gauge its odds for success. d. capitalize on the availability of cutting-edge technology. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-5 Screening New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.05 - LO: 3-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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46. As China's production of exportable goods increases, Chinese workers have more money to spend on consumer items. Other developing countries are experiencing the same growth. Which of the following types of trends does this represent? a. Economic b. Sociocultural c. Global d. Demographic ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 47. Today's smartphones bear little resemblance to the original analog cell phones of the early 1990s. Smartphone capabilities exceed those of the early desktop computers. It seems nearly every adult carries at least one smartphone. Which of the following types of trends does this represent? a. Sociocultural b. Demographic c. Technological d. Global ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 48. TV commercials promote reverse mortgages. Other ads promote medications for high blood pressure, allergies immune system disorders, and high cholesterol. Which of the following types of trends do these represent? Copyright Cengage Learning. Powered by Cognero.

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a. Sociocultural b. Global c. Technological d. Demographic ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 49. Which of the following factors did Michael Porter identify as determining the nature and degree of competition in an industry? a. The interest of small businesses b. Bargaining power of competitors c. Threat of substitute products or services d. The macroeconomic level of the industry ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 50. Substitute products a. reduce the potential attractiveness and profitability of a target industry. b. represent those items manufactured by direct rivals within a target industry. c. are usually cheaper than the products they can replace. d. are always a serious threat to rivals in a target industry. ANSWER: a POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 51. Considering Michael Porter's five factors that determine the nature and degree of competition in an industry, we can say that the fast-food hamburger industry is characterized by a. intense rivalry. b. strong suppliers. c. strong buyers. d. ease of entry into the industry. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 52. An increase in the bargaining power of suppliers _____ of a target industry. a. increases both the attractiveness and the profitability b. decreases both the attractiveness and the profitability c. decreases the attractiveness and increases the profitability d. increases the attractiveness and decreases the profitability ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Analyze 8/29/2018 11:21 AM 12/29/2018 5:32 PM

53. Which of the following does an outside-in analysis consider? a. The general environment b. The competitive environment c. The industry environment d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 4:57 AM 54. Demographic trends include all of the following EXCEPT a. ethnic mix. b. wage distribution. c. social status. d. age structure. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 55. The diamond market is monopolized by the DeBeers organization, from mining to cutting and polishing to wholesaling. Jewelers can do little to negotiate prices. This situation typifies a. powerful buyers. b. availability of substitutes. Copyright Cengage Learning. Powered by Cognero.

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c. intense rivalry. d. powerful suppliers. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 56. Farmers who wish to sell grain cannot negotiate a price; they either accept the price offered or decline to sell their crop. This is an example of a. low barriers to entry. b. availability of substitutes. c. intense rivalry. d. powerful buyers. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 57. Entrepreneurs who want to start or build a business based on inside-out analysis will first need to a. have an in-depth understanding of the general environment. b. select and implement a focus strategy. c. determine the strength, position, and likely responses of rival businesses. d. have a solid grasp of the resources and capabilities that are available to them. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 58. William A. Sahlman of Harvard Business School contends that every aspiring entrepreneur should answer which of the following questions about the competitors he or she is likely to encounter in the marketplace? a. Are there ways to co-opt potential or actual competitors by forming alliances? b. How easily can new competitors enter the industry? c. Do small businesses have special advantages when competing in the industry? d. What is the average size of competitors? ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 59. An inside-out analysis is one that a. considers the general environment and industry setting. b. catalogs the startup's sources of potential strengths. c. considers the strengths of buyers and suppliers. d. catalogs the possible responses of rivals in the industry. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

12/29/2018 5:32 PM

60. Miles' startup company began well, but within a couple months he found he was unable to pay invoices from suppliers. He didn't understand how he could have this problem. He hired experts; his business idea was sound; and he had many new customers. What went wrong? a. Miles lacked critical technologies. b. Miles lacked patents or copyrights. c. Miles lacked raw materials. d. Miles lacked cash resources. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 61. Resources are best described as a. those inputs that an entrepreneur can use to operate a business. b. only those features that are visible and easy to measure. c. the firm's lending capacity. d. capabilities that can be exploited. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 62. Tangible resources include a. cash reserves, manufacturing equipment, and an office building. b. cash reserves, management expertise, and a favorable reputation. c. management expertise, a favorable reputation, and manufacturing equipment. Copyright Cengage Learning. Powered by Cognero.

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d. intellectual property rights, manufacturing equipment, and an entrepreneur's personal network of contacts and relationships. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 63. Intellectual property rights are an example of a(n) a. tangible resource. b. intangible resource. c. capability. d. competitive advantage. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 64. Rumpelstiltskin, an imp in a Brothers Grimm fairy tale, could spin straw into gold. We would call this a(n) a. useful skill. b. tangible resource. c. intangible resource d. capability. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 65. Which of the following statements about resources and capabilities is true? a. Resources technically are the same as capabilities. b. A startup or small business can have both tangible and intangible capabilities. c. Resources can do nothing on their own. d. Capabilities are inputs to the work of a business. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 66. Which of the following could be considered a core competency? a. Zappos' 365-day return policy b. NutriSystem's claim that users lose weight by eating c. McDonald's ability to fry hamburgers quickly d. Southwest Airlines' ability to make flying fun ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM Copyright Cengage Learning. Powered by Cognero.

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67. Morris built a thriving business by selling tailor-made clothing at off-the-rack prices. All other custom-clothing stores charge much higher prices. We can say that Morris has a. a core competency. b. a competitive advantage. c. a serendipity. d. opportunity alertness. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 68. A SWOT analysis can be described best as a(n) a. means of assessing a firm's industry situation. b. assessment of the internal strengths and weaknesses of a firm. c. dynamic analysis of a firm's current situation. d. assessment that provides a concise overview of a firm's strategic situation. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 69. Which of the following would be classified as an opportunity when conducting a SWOT analysis? a. Positive reputation in the marketplace b. Slowed market growth c. Emerging technologies d. Strong network of personal contacts ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 70. Which of the following is a drawback of a SWOT analysis? a. It is very time-consuming. b. A professional consultant must perform it. c. It focuses on present conditions. d. It requires information about competitors not readily available to outsiders. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 71. The entrepreneur's "_____" is found at the point of overlap of emerging potentials in the external environment and the unique strengths and capabilities of the entrepreneur and the venture. a. opportunity sweet spot b. paradox of attraction c. opportunity recognition d. fatal flaw ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Creation of Value Bloom's: Understand 8/29/2018 11:21 AM 12/29/2018 5:32 PM

72. Generally speaking, a strategy is a. a set of actions that coordinates the resources and commitments of a business to boost its performance. b. a formal statement of what the firm intends to do. c. an expanded description of the firm's mission statement. d. most effective when it is designed to reflect the tactics that are common within an industry. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 73. The two broad-based strategies for capturing opportunities are the _____ and _____ strategies. a. cost-based; differentiation-based b. price-based; cost-based c. marketing-based; price-based d. focus-based; efficiency-based ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 74. Which of the following is a disadvantage of using a cost-based strategy? a. It requires a geographically limited market. b. The business may become too specialized, resulting in two few customers to be viable. Copyright Cengage Learning. Powered by Cognero.

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c. It attracts intense competition. d. It is difficult to generate customer loyalty. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 75. Milton's Auto Service is a small auto maintenance and repair shop located in a small town in a garage behind Milton's house. Milton doesn't charge as much as auto dealerships, so he has a steady stream of local customers. Which of the following best describes Milton's strategy? a. Innovation b. Strategic alliances c. Cost-based d. Differentiation-based ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 76. Marketplace Farms is a regional cooperative of fig and orange growers. In order to compete against larger regional growers, the company relies on inexpensive packaging processes and lower-cost labor instead of machines. Marketplace Farms is relying on what type of strategy? a. Price-based b. Marketing-based c. Efficiency-based d. Cost-based ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 77. A differentiation-based strategy requires that a firm a. be the lowest-cost provider in an industry. b. emphasize the uniqueness of its product or service. c. achieve the highest resource efficiency in an industry. d. be the lowest-priced competitor in an industry. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 78. Kitty-Kat Korner fabric shop caters to the quilters in the region. Nowhere else can a quilter find everything she needs: fabrics, notions, pattern books, even quilting machines and quilting classes. This is not your typical fabric store by any means. Which of the following best describes Kitty-Kat's strategy? a. Innovation b. Differentiation-based c. Cost-based d. Strategic alliances ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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79. Containers Etc. manufactures household containers. In contrast to traditional market designs, all of the products are microwaveable, child-proof, and come in an assortment of 35 colors. Accordingly, Containers Etc. is pursuing a _____ strategy. a. product-based b. differentiation-based c. concept-based d. efficiency-based ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 80. A focus strategy is best described as a. an attempt to compete directly with industry giants. b. a domestic marketing strategy. c. a plan of action that isolates an enterprise from market forces. d. targeting the high end of a market. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM Copyright Cengage Learning. Powered by Cognero.

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81. Mark is the owner of Delectable Delights, a specialty store offering chocolates, candies, and fruit baskets. After a recent analysis of the competitive environment, Mark concluded that three distinct consumer segments exist for his products: A, B, and C consumers. In an effort to maximize the effectiveness of his strategy, Mark has decided to limit his efforts to fulfilling the needs of A consumers. He is employing a _____ strategy. a. multisegmentation b. selective c. focus d. concentration ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 82. Kitty-Kat Korner fabric shop caters to the quilters in the region. Other fabric shops carry fabrics for all types of clothing, along with floral, yarn, and other craft supplies. Kitty-Kat only carries items related to quilting. Which of the following best describes Kitty-Kat's strategy? a. Focus b. Cost-based c. Quality d. Innovation ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 83. A focus strategy can be set up in all of the following ways EXCEPT a. by expanding the market to a number of geographical regions. b. by concentrating on the superiority of the product or service. c. by emphasizing a single product or service. Copyright Cengage Learning. Powered by Cognero.

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d. by restricting the target market to a single subset of customers. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 84. According to strategy guru Michael Porter, a segmented market can erode when a. the focus strategy is protected. b. the target segment loses its uniqueness. c. new firms reconstruct the industry. d. demand for the product grows and thus attracts new competitors. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 85. Which of the following actions causes a segmented market to erode? a. Consumer demand grows. b. New firms reconstruct the industry. c. Differences between segments grow larger. d. The focus strategy is imitated. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 86. As the success of the athletic teams at O-MY-U skyrocketed, so did attendance at the games. Out-of-town visitors found all the hotels fully booked. In response, Bob and Shirley opened their home to guests on weekends, operating as a bed and breakfast. Soon many of their neighbors did the same, and Bob and Shirley found they could no longer fill all their rooms every game weekend. How would Michael Porter explain this? a. The focus strategy was imitated. b. Demand disappeared. c. The target segment lost its uniqueness. d. The industry became further segmented. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze | Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 87. O-MY-U once had a winning team in every college sport, but athletes graduate and fortunes change. For the past four seasons, the school has only won five games. Hotels in the area that were consistently booked during winning seasons found themselves with vacancies, even with discounted prices. How would Michael Porter explain this? a. The focus strategy was imitated. b. Demand disappeared. c. The target segment lost its uniqueness. d. New firms subsegmented the industry. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Analyze 8/29/2018 11:21 AM 12/29/2018 5:32 PM

88. Many direct sales organizations suggest that the new "member" begin selling the product part time while continuing to work at his or her regular job. Which of the following explanations best fits this recommendation? a. The business meets a definite market need. b. The target market is sizable. c. There are few competitors. d. The business can be tested cheaply and expanded incrementally. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-5 Screening New Business Ideas QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.05 - LO: 3-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 89. Which of the following statements about a macro-level and micro-level analysis is true? a. A macro-level analysis assesses the overall attractiveness in which the startup will be established. b. A macro-level industry assessment is focused on the probability of a startup's success over the long run. c. A macro-level analysis should clarify the unique value that the startup idea would offer customers. d. A macro-level analysis is focused on identifying market niches. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 12/28/2018 6:59 PM DATE MODIFIED: 12/29/2018 5:32 PM 90. Miriam opened a yarn craft store in her small town based on her personal interests and hobbies. There were no competitors locally; the merchandise was readily available; and she had the initial capital to open the store. Yet her business failed. Too few customers visited her store. What was Miriam's fatal flaw? Copyright Cengage Learning. Powered by Cognero.

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a. The merchandise was patent protected. b. Miriam could not raise enough capital. c. Miriam lacked industry knowledge. d. Miriam ignored market limitations. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 91. Which of the following best describes the distinction between a market and an industry? a. A market has higher barriers to entry than an industry. b. A market consists of direct sellers, whereas an industry consists of intermediaries. c. Unlike industries, markets should be considered from both a "big-picture" and a more focused point of view. d. A market consists of buyers, whereas an industry consist of sellers. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 92. Jesse would like to start a landscaping company that concentrates on using native plants. The feasibility analysis showed a need for $100,000 to start the company (she has $10,000), competition of three other companies (one concentrated on using native plants), and buyers who were predominantly 60 years or older (who loved yard work). Which of the following statements is true? a. This plan shows fatal flaws with financing, competition, and market because none of these flaws could be fixed. b. The plan has a fatal flaw with financing and competition because the market might have an interest in her specialty. c. The plan has a fatal flaw with financing but competition might not be as much of an issue if the native plant landscaping is growing with the buyers. Copyright Cengage Learning. Powered by Cognero.

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d. The plan could be fixed if an investor went into business with her. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze | Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 93. Peggy would like to open a dog grooming business in her home. Which of the following, if true, would indicate this is a good idea? a. More households now own dogs, but the owners don't want to give them regular baths. b. Fewer households now own dogs, but the owners don't want to give them regular baths. c. Fewer households now own dogs, but the owners give them regular baths. d. More households now own dogs, but the owners give them regular baths. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 94. Mike and Jane opened a franchise sporting goods store. Neither was athletic; neither had ever managed a retail store; and the business failed within one year. Which of the following statements best explains these results? a. The venture did not fit with their mission or aspirations. b. They had no connections with suppliers, customers, or investors. c. They lacked a grasp of factors that are critical to the success of the enterprise. d. They failed to complete a feasibility analysis. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 95. Compare and contrast personal experience, hobbies and personal interests, and accidental discovery as a source of startup ideas. Use examples to strengthen the discussion. ANSWER: Personal experiences are one of the primary sources of startup ideas. They produce ideas that are related to the individual's skills and knowledge and may result from past work experience. Accidental discovery and serendipity, on the other hand, may happen at any time and be totally unrelated to the individual's background. Sometimes hobbies and personal interests grow beyond being leisure activities to become businesses (such as Mark Zuckerberg with Facebook). For instance, people who love skiing might start a ski equipment rental operation as a way to make income from an activity they enjoy. POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-1 Developing Startup Ideas QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 96. Select one of the ways of innovative thinking, explain it, and give an example of a business idea this type of thinking might generate. ANSWER: Students may choose from any of the following ways of innovative thinking: • • • • • • • • • • • •

Borrow from existing product and service ideas or other industries. Combine two businesses to create a market opening. Begin with a problem in mind. Recognize a popular trend, and ride the wave. Improve the function of an existing product or service. Streamline a customer's activities. Adapt a product or service to meet customer needs in a different way. Creatively expand the market for a product or service. Cash in on the sharing economy. Offer a "green" product or service alternative. Keep an eye on new technologies. Offer products through a subscription service.

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Students may use either the examples from the text or think of their own. POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-2 Using Innovate Thinking to Generate Business Ideas QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.02 - LO: 3-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply | Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 97. List the five factors that determine the nature and degree of competition in an industry as presented by Michael Porter. Why is the proper identification of these factors important for a new venture? ANSWER: 1. New competitors 2. Substitute products/services 3. Rivalry 4. Suppliers 5. Buyers Profits in an industry tend to be inversely related to the strength of these factors—that is, strong factors yield weak profits, whereas weak factors yield strong profits. Entrepreneurs who understand industry influences can better identify high-potential startup opportunities and anticipate threats they are likely to encounter. POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 98. Describe the differences and relationships among resources, capabilities, and core competencies. How do these items relate to inside-out analysis? ANSWER: Resources are basic inputs that an entrepreneur can use to start and/or operate a business, such as cash for investment, knowledge of critical technologies, access to essential equipment, and capable business partners. Companies have both tangible and intangible resources. Capabilities are best viewed as the company's routines and processes that coordinate the use of these productive assets to achieve desired outcomes. Copyright Cengage Learning. Powered by Cognero.

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Core competencies are those crucial capabilities that distinguish a company competitively; reflect its general focus and personality; and, in most cases, make it possible to achieve a competitive advantage over its rivals. An inside-out analysis catalogs the resources and capabilities available to the startup leading to core competency identification. By using resources and capabilities in unique ways, a firm can establish its core competencies and apply them to obtain a competitive advantage. POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-3 Using Internal and External Analyses to Assess New Business Ideas QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.03 - LO: 3-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 99. Name and describe the two broad-based strategy options that a firm can select when pursuing a competitive advantage in the marketplace. ANSWER: Strategies can be condensed into either a cost-based strategy or a differentiation-based strategy. To follow a cost-based strategy, a firm must hold down its costs so that it can compete by charging lower prices for its products or services and still make a profit. The sources of cost advantages are varied, ranging from low-cost labor to efficiency in operations. Cost advantages are so numerous and diverse that, in some cases, small businesses may be able to use them with great success. A differentiation-based strategy emphasizes the uniqueness of a firm's product or service (in terms of some feature other than cost). For the strategy to be effective, the consumer must be convinced of the uniqueness and value of the product or service, whether real or perceived. POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 100. In what ways can a small firm implement a focus strategy? ANSWER: Focus strategies can be set up in the following ways: Copyright Cengage Learning. Powered by Cognero.

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•

By restricting the target market to a single subset of customers.

•

By emphasizing a single product or service.

•

By limiting the market to a single geographical region.

•

By concentrating on the superiority of the product or service.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 101. Identify and discuss the five factors that entrepreneurs should consider when screening new business ideas. ANSWER: 1. Strength of the business idea. The best business ideas will meet a definite market need, create value for end users, and offer products or services that customers favor and find easy to use. They also will have no fatal flaws. 2. Targeted market and customers. Businesses are more likely to thrive if they focus on a sizable market that is easy to identify, growing rapidly, and composed of customers with high levels of purchasing power that they are very willing to use. Further, the best customers will be easily reachable through clear channels of promotion. 3. Industry and competitive advantage. The most favorable industries for startups have few or no competitors, are growing quickly (to allow room for new entrants), and future high operating margins. They also present few or no barriers to entry to keep businesses out and would allow a startup to establish and sustain its specific competitive advantage. 4. Capability of founder(s). In a best-case scenario, the founder(s) will have industryrelated experience, skills, and networks, as well as a great passion for and a good fit with the new business. 5. Capital requirements and venture performance. An entrepreneur will fare best when the venture needs little capital to launch, its anticipated profit potential is great, and similar enterprises perform very well. Low levels of liability and other risks are ideal, as is the ability to start the new business incrementally or test it cheaply before full launch. POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-5 Screening New Business Ideas QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.05 - LO: 3-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Creation of Value Bloom's: Understand 8/29/2018 11:21 AM 12/29/2018 5:32 PM

102. Briefly state the difference between a market and an industry. How are these two items related to small business success? ANSWER: A market consists of buyers, current or potential customers who are interested in purchasing a particular class of products or services to satisfy their wants or needs—and they must have the ability to pay for them. An industry is composed of sellers who compete with one another by offering identical or similar products or services for sale to the same general group of buyers. Both markets and industries are considered part of the macro level of the business. A market with potential, an attractive industry and a capable individual or team with skills and capabilities to pull together are critical for success. POINTS: 1 DIFFICULTY: Hard REFERENCES: 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM

Match the term with its definition. a. capabilities b. competitive advantage c. competitive environment d. core competencies e. cost-based strategy f. differentiation-based strategy g. entrepreneurial alertness h. fatal flaw i. feasibility analysis DIFFICULTY: Easy REFERENCES: 3-0 Starting a Small Business 3-3 Using Internal and External Analyses to Assess New Business Ideas 3-4 Selecting Strategies That Capture Opportunities 3-6 Is Your Startup Idea Feasible? QUESTION TYPE: Matching HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 SMAL.LONG.20.03.03 - LO: 3-3 SMAL.LONG.20.03.04 - LO: 3-4 SMAL.LONG.20.03.06 - LO: 3-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 3:45 PM 103. A benefit that exists when a firm has a product or service that is seen by its target market as better than that of competitors ANSWER: b POINTS: 1 104. Readiness to act on existing, but previously unnoticed, business opportunities ANSWER: g POINTS: 1 105. The capabilities that distinguish a firm competitively and reflect its focus and personality ANSWER: d POINTS: 1 106. A preliminary assessment of a business idea that gauges whether the venture envisioned is likely to succeed ANSWER: i POINTS: 1 107. A company's routines and processes that coordinate the use of its productive assets in order to achieve desired outcomes ANSWER: a POINTS: 1 108. A circumstance or development that alone could render a new business unsuccessful ANSWER: h POINTS: 1 109. A plan of action designed to provide a product or service with unique attributes that are valued by consumers ANSWER: f POINTS: 1 110. The environment that focuses on the strength, position, and likely moves and countermoves of competitors in an industry ANSWER: c POINTS: 1

Match the term with its definition. a. focus strategies b. general environment Copyright Cengage Learning. Powered by Cognero.

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c. industry environment d. intangible resources e. new benefit ideas f. new market ideas g. new technology ideas h. opportunity recognition DIFFICULTY: REFERENCES:

Easy 3-0 Starting a Small Business 3-1 Developing Startup Ideas 3-3 Using Internal and External Analyses to Assess New Business Ideas 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.00 - LO: 3-0 SMAL.LONG.20.03.01 - LO: 3-1 SMAL.LONG.20.03.03 - LO: 3-3 SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 111. Startup ideas centered around providing customers with an existing product or service not available in their market ANSWER: f POINTS: 1 112. A plan of action that isolates an enterprise from competitors and other market forces by targeting a restricted market segment ANSWER: a POINTS: 1 113. Startup ideas centered around providing customers with new or improved products or services or better ways of performing old functions ANSWER: e POINTS: 1 114. The environment that includes factors that directly impact a given firm and all of its competitors ANSWER: c POINTS: 1 115. Startup ideas involving new or relatively new technology, centered around providing customers with a new product or service ANSWER: g POINTS: 1 116. The broad environment, encompassing factors that influence most businesses in a society ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 117. Organizational resources that are invisible and difficult to assess ANSWER: d POINTS: 1

Match the term with its definition. a. paradox of attraction b. pivot c. resources d. serendipity e. startups f. strategy g. SWOT analysis h. tangible resources DIFFICULTY: REFERENCES:

Easy 3-1 Developing Startup Ideas 3-3 Using Internal and External Analyses to Assess New Business Ideas 3-4 Selecting Strategies That Capture Opportunities QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.03.01 - LO: 3-1 SMAL.LONG.20.03.03 - LO: 3-3 SMAL.LONG.20.03.04 - LO: 3-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 5:32 PM 118. To refocus or recreate a startup if the initial concept turns out to be flawed ANSWER: b POINTS: 1 119. A plan of action that coordinates the resources and commitments of an organization to achieve superior performance ANSWER: f POINTS: 1 120. New business ventures created "from scratch" ANSWER: e POINTS: 1 121. The basic inputs that an entrepreneur can use to start and/or operate a business ANSWER: c POINTS: 1 122. Organizational resources that are visible and easy to measure Copyright Cengage Learning. Powered by Cognero.

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ANSWER: h POINTS: 1 123. An assessment that provides a concise overview of a firm's strategic situation ANSWER: g POINTS: 1 124. A facility for making desirable discoveries by accident ANSWER: d POINTS: 1

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Chapter 04 - Franchises and Buyouts 1. Coca-Cola soft drink bottlers are an example of a product and trade name franchisor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 2. A franchising strategy whereby a single franchisee owns more than one unit of the franchised business is typically referred to as a multiple-unit ownership strategy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 3. One of the advantages of buying a franchise is that the purchaser has access to a business model with a proven track record. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 4. The practice of putting one franchise right next to another is referred to as piggyback franchising. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 5. Perhaps the most fundamental argument against the franchise model is that it increases the level of risk for business owners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 6. The processing of a loan application can be completed more quickly if the franchising organization is registered with the U.S. Small Business Administration. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 7. The unscrupulous actions by franchisors to void the contracts of franchisees in order to sell the franchise to someone else and collect an additional fee is called chewing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 8. A franchisor that sells another franchise location within the market area of an existing franchisee is using a piggybacking franchising strategy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom's: Remember 8/29/2018 11:21 AM 1/2/2019 8:16 PM

9. In many cases, a franchisor will receive payments in the form of royalties that are based on a percentage of the franchisee's gross income. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 10. One of the benefits of a franchise agreement for the franchisee is that the franchisor is solely responsible for advertising the franchise. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:17 PM 11. Due to a decrease in the number of franchises over the past decade, the task of selecting an appropriate franchise has become more difficult. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 12. There is no need to find out more information about a prospective franchise as the franchisor should be the primary source of information. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 13. Jarrod is reading a detailed statement of the franchisor's finances, experience, size, and involvement in litigation. Jarrod is reading a Franchise Disclosure Document (FDD). a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Analyze 8/29/2018 11:21 AM 1/2/2019 8:18 PM

14. As of 2008, the Federal Trade Commission's Franchise Rule prescribes that franchisors have discretion in disclosing to prospective franchisees information such as prior bankruptcies, the business experience of the principals, and litigation in which the firm is involved. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 15. Business brokers specialize in the sale of business firms and business properties. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 16. As part of the valuation process, a buyer should scrutinize the seller's bank statements, supplier invoices, and customer receipts to validate the accuracy of the company's financial statements. a. True b. False ANSWER: True POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand NOTES: Operations Management DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:19 PM 17. A nondisclosure agreement signed by a prospective buyer shows the seller that the buyer intends to purchase the business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 18. Financial statements can mislead a potential buyer trying to develop an accurate business valuation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

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19. The buyer of an existing business typically acquires its personnel, inventories, physical facilities, established banking connections, and ongoing relationships with trade suppliers and customers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 20. A wise buyer will also evaluate the legal commitments of an existing business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 21. To control costs when purchasing a business, the buyer's attorney or the seller's attorney can be used as the closing agent. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 22. Caron signed a contract with Devon allowing her to provide services using Devon's trademark, logo, and business model. This business is a(n) a. franchise. b. franchisor. c. franchisee. d. independent business. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 23. Edward signed a contract allowing Francine to sell products using his trade name so long as the product meets Edward's quality standards. Edward is a(n) a. franchise. b. franchisor. c. franchisee. d. independent business owner. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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24. Annabelle has been granted the right to conduct business according to specified methods and terms of another party. Annabelle is a a. franchisor. b. franchisee. c. franchise. d. licensee. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 25. The two primary forms of franchising are _____ franchising and _____ franchising. a. product; service b. co-branding; multibrand c. product and trade name; business format d. individual; business ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 26. Ford automobile dealers and Chevron convenience stores are examples of companies that engage in a. product and trade name franchising. b. business format franchising. c. multibrand franchising. Copyright Cengage Learning. Powered by Cognero.

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d. co-branding. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 27. Starbucks operates outlets inside some grocery stores, such as Safeway and Kroger. This is an example of a. product and trade name franchising. b. piggyback franchising. c. multibrand franchising. d. area development. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 28. The legal agreement Irma signed with McDonald's that allows her to open a restaurant using the McDonald's name is a(n) a. master license. b. area development plan. c. lend-lease agreement d. franchise contract. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 29. JKL Corporation grants another party the right to conduct business according to specified methods and terms. JKL is a a. franchisor. b. franchisee. c. franchise. d. licenser. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 30. All of the following are examples of companies that engage in business format franchising EXCEPT a. Choice Hotels. b. Carl's Jr. c. Goodyear Tires d. Jani-King. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM Copyright Cengage Learning. Powered by Cognero.

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31. Belinda signed a _____, which is a legal agreement between the franchisor and franchisee that spells out the relationship and obligations between the two parties. a. master license b. franchise contract c. requirements contract d. franchise consent draft ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 32. Individuals or firms that obtain the legal right to open several franchised businesses in a given area are referred to as a. development franchisees. b. area developers. c. piggyback franchisees. d. multiple-unit owners. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 33. Matthew is an individual acting as a sales agent with the responsibility for finding new franchisees within a specified territory. Matthew is a(n) a. multiple-unit franchisor. b. area developer. c. franchisor representative. d. master licensee. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 34. Jeffrey's job is to identify potential businesspeople in his country who might want to do business using a particular brand name. When the contract is signed, Jeffrey then provides training to the businessperson. Jeffrey is most likely a a. franchisee. b. franchisor. c. master licensee. d. co-brander. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 35. Rick was so successful with his Sweet Treats franchise that he opened several other Sweet Treats locations. Rick could best be described as a a. franchisor. b. franchisee. c. master licensee. d. multiple-unit owner. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 36. Martina's franchise agreement allows her to open up to seven new stores within a 100-mile radius of the first one. Martina is best described as a(n) a. master licensee. b. franchisee. c. franchisor. d. area developer. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 37. The franchising strategy whereby an individual or firm is granted the legal right to own more than one unit of a franchised business is known as a. multibrand franchising. b. multiple-unit ownership. c. piggyback franchising. d. aggregate ownership. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM Copyright Cengage Learning. Powered by Cognero.

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38. A Subway restaurant located inside a Walmart is an example of _____ franchising. a. folded b. internalized c. cooperative d. piggyback ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 39. Sister Mary Cupcake has partnered with the management of the toll road to operate her stores in the travel plazas. This arrangement is an example of a. master licensing. b. piggyback franchising. c. area development. d. multibrand franchising. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 40. Quality Dining, Inc., operates several different restaurant franchises including Burger King and Chili's. Quality Dining has its own corporate structure and stockholders. This corporation is an example of a. master licensing. b. multibrand franchising. c. piggyback franchising. Copyright Cengage Learning. Powered by Cognero.

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d. co-branding. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 41. An entrepreneur would choose a franchise over an independent startup most likely because of the a. freedom in decision making. b. guidance provided for organizational structure. c. probability of success. d. opportunities to meet and share ideas with other executives. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 42. Which of the following statements about the International Franchise Association (IFA) is NOT true? a. The IFA maintains a registry of franchisors who have gone through an eligibility review service. b. Firms joining the IFA today are required to adhere to a code of ethics, the value of which are "trust, truth, and honesty." c. The IFA demands adherence to laws and offers conflict resolution services for franchisees and franchisors. d. The IFA encourages franchisors to recruit minorities and veterans as franchisees by offering financial incentives. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:20 PM 43. A _____ may be the single most valuable tool provided to a franchisee. a. Franchise Disclosure Document (FDD) b. marketing plan c. code of ethics d. operations manual ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 44. Franchisors support their franchisees by doing all of the following EXCEPT a. hiring employees. b. reducing purchasing costs. c. designing promotional campaigns. d. providing training. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM Copyright Cengage Learning. Powered by Cognero.

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45. The registry maintained by the U.S. Small Business Administration a. lists warnings about certain franchisors. b. speeds up loan processing for franchisees. c. rates franchisors according to a four-star rating. d. registers all franchisors operating in the United States. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 46. Martin operates an ABC franchise. Recently, the franchisor has attempted to make changes to the contract that would increase Martin's costs so as to make the business unprofitable. The franchisor is engaging in a. master licensing. b. encroachment. c. due diligence. d. churning. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 47. Which of the following is considered an advantage of franchising? a. Franchising can be a way for existing companies to diversify. b. Attractive franchisors offer value because they have names and trademarks that are well known to prospective customers. c. A number of franchisors provide or facilitate financing for franchisees. Copyright Cengage Learning. Powered by Cognero.

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d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 4:58 AM 48. The franchise contract that Pamela signed with DEF Company specified she would have an exclusive sales territory. While the contract was still in force, DEF opened a corporate-owned store within her territory. DEF is guilty of a. master licensing. b. encroachment. c. due diligence. d. churning. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 49. Membership of the International Franchise Association (IFA) comprises over _____ percent of all registered franchisors _____. a. 70; in the United States b. 85; in the United States c. 70; around the world d. 85; around the world ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:21 PM 50. Owners of nearly 7,000 7-Eleven franchise locations formed the National Coalition of Associations of 7-Eleven Franchisees and sued the franchisor, 7-Eleven, Inc., when they did not see the financial returns they expected. They attributed this to the franchisor a. not performing due diligence. b. being misleading about earning opportunities. c. burdening outlets with restrictive practices. d. opening too many outlets. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Ethical Responsibilities KEYWORDS: Bloom's: Apply | Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 51. Royalty fees typically range between _____ and _____ percent of the gross income that the franchisee receives from customers for selling the franchised products and services. a. 5; 9 b. 3; 5 c. 1; 2 d. 10; 15 ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom's: Remember 8/29/2018 11:21 AM 1/2/2019 12:44 PM

52. H&R Block was sued by a franchisee for selling Internet services within the franchisee's territory without offering any compensation. This is an example of a. churning. b. co-branding. c. encroachment. d. multibrand franchising. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 53. In what way is a franchisee's freedom to run the business greatly reduced? a. Most franchisors are located near the franchisee. b. The franchisees are technically employees of the franchisor. c. The franchisee is bound by the terms of the franchise contract. d. The franchisee is completely dependent on the franchisor for funding. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM Copyright Cengage Learning. Powered by Cognero.

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54. Which of the following is NOT one of the most common restrictions imposed on franchisees? a. Imposing requirements regarding outlet appearance b. Limiting sales territories c. Imposing requirements on the level of community involvement d. Limiting advertising and hours of operation ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 55. Which of the following companies is credited with being the first franchisor in the United States? a. Singer Sewing Machine b. McDonald's c. H&R Block d. Nathans's Famous Inc. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:22 PM 56. A franchise contract a. should be drafted by both the franchisee and franchisor. b. is drafted by, and most likely favors, the franchisee. c. should be drafted by the franchisee's attorney. d. is drafted by, and most likely favors, the franchisor. ANSWER: d POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 57. Stuart is interested in opening a QRS franchise. QRS requires an up-front payment of $150,000. This amount represents a. Stuart’s investment costs. b. the initial franchise fee. c. royalty payments. d. marketing fees. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 58. Kelly is interested in opening an XYZ franchise. In addition to an up-front payment of $100,000, Kelly will have to pay building costs and purchase inventory and equipment. This type of expense is called a. investment costs. b. the initial franchise fee. c. royalty payments. d. marketing fees. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Apply 8/29/2018 11:21 AM 1/2/2019 12:44 PM

59. All of the following are components of franchise costs EXCEPT a. royalty payments. b. advertising costs. c. a one-time federal franchise tax. d. investment costs. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 60. Each month, Tomas must report his gross income and pay a percentage of that amount to his franchisor. This percentage is a. negotiable every month. b. finance charges. c. royalty fees. d. an investment cost. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 61. In addition to the regular monthly payment of a percentage of gross income to her franchisor, Wilma is required to submit a smaller percentage for advertising costs. She is willing to do this because Copyright Cengage Learning. Powered by Cognero.

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a. otherwise she will not be able to operate her franchise. b. she will receive a discount on the cost of her inventory. c. she will in turn be charged a lower insurance premium. d. the franchisor can promote the business more cost-efficiently than Wilma can on her own. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:23 PM 62. Where would you suggest Xavier look for information about possible franchise opportunities? a. Barron’s Weekly b. Inc, Entrepreneur, or the Wall Street Journal c. The Small Business Administration d. Local newspapers ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 63. Bart is meeting with a representative of GHI, a franchisor. He has received information about the franchisor's finances, experience, size, and involvement in litigation. Bart has been given a a. master license. b. nondisclosure statement. c. franchise rule. d. Franchise Disclosure Document (FDD). ANSWER: d POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 64. Which of the following questions is the least important when developing a franchise from an independent business? a. Who will develop the operations manual? b. Is the business replicable? c. How will growth be financed? d. What expert assistance will be needed for legal matters? ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 65. A potential franchise should be skeptical of a franchisor that a. owns more than one trade name. b. pressures him or her to sign a contract without time for proper investigation. c. is not a member of the International Franchise Association (IFA). d. is not certified by the government. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:21 AM 1/2/2019 12:44 PM

66. Cameron has established a successful business and would like to expand. He is considering becoming a franchisor. Before taking that step, Cameron should a. make sure his business is replicable. b. have a technical writer create an operations manual. c. partner with a lender to offer franchisee financing. d. hire a master licensee to locate prospective franchisees. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 67. One of the most important features of the franchise contract is the provision relating to a. the sale or transfer of the franchise to a government entity. b. changes in management. c. termination and transfer of the franchise. d. termination of contracts with suppliers. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 68. The offer and sale of a franchise are a. regulated by state laws exclusively. b. regulated by federal laws exclusively. c. regulated by both state and federal laws. Copyright Cengage Learning. Powered by Cognero.

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d. not regulated. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 4:59 AM 69. Before signing a franchise contract, a potential franchisee should obtain the services of which of the following a. A union representative, an attorney, and a technical writer b. An attorney, an accountant, and a banker c. A banker, an accountant, and a contract law consultant. d. An accountant, another franchisee, and a banker ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 70. Which of the following is NOT a reason for buying an existing business? a. Reduction of uncertainty b. Acquisition of ongoing operations and relationships c. Ease of obtaining financing d. A quick start ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 71. Most franchise experts recommend that the Franchise Disclosure Document (FDD) be reviewed by a. regulators that specialize in such documents. b. an attorney and accountant. c. everyone associated with the potential startup. d. suppliers that may be used if the startup is successful. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:24 PM 72. Edmond is negotiating to purchase an existing business. One provision he should write into the sale contract is a. access to the seller’s customer list. b. disclosure of the business’s revenues for the last year. c. a statement of the royalties payable to the seller. d. a noncompete agreement. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM Copyright Cengage Learning. Powered by Cognero.

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73. A potential franchisee should be wary of contract provisions that a. do not clearly spell out the rights of the franchisee to sell the business to a third party. b. do not discuss contract renewal after the business has been built up to a successful operating level. c. contain overly strict or vague cancellation policies. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 4:59 AM 74. A bargain price for an existing business is NOT a good deal for the buyer when the a. seller intends to open a competing business in the same locality. b. business is losing money. c. neighborhood is deteriorating. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 4:59 AM 75. Fred's company specializes in bringing together buyers and sellers of businesses. Fred is a(n) a. business broker. b. master licensee. c. area developer. d. realtor. ANSWER: a POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 76. When conducting due diligence on whether to purchase a business, the two most valuable sources of outside assistance are _____ and _____. a. customers; suppliers b. customers; bankers c. accountants; lawyers d. vendors; lawyers ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 77. Susan is considering buying the local franchisee of Pots-R-Us. Before making the purchase, as part of the due diligence process, she should do all of the following EXCEPT a. hire a business broker to draft a nondisclosure agreement. b. verify that the company owns all the assets listed on the balance sheet. c. make sure all licensing, permits, and zoning requirements are met. d. review all existing contracts with suppliers and employees. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Analyze 8/29/2018 11:21 AM 1/2/2019 12:44 PM

78. When evaluating the financial data of a 10-year-old business that is being considered for purchase, which of the following issues will be of least concern? a. Understated business income in an effort to minimize taxes b. Unrealistically reduced levels of advertising cost c. Business expenses related to personal use of vehicles d. Not having the books for Years 1–5 due to a fire ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 79. Harold was given the chance to examine the tax returns and financial statements of a business he is considering for purchase. The seller asked him to sign a _____ that prohibits Harold from sharing this confidential information with anyone else. a. franchise contract b. due diligence document c. Franchise Disclosure Document (FDD) d. nondisclosure agreement ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM Copyright Cengage Learning. Powered by Cognero.

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80. Imelda reports only half the cash from the vending machines on her cash flow statement and income tax returns. Her purpose in doing so is to a. reduce her income tax liability. b. increase her net income on the financial statement. c. retain the cash for reinvestment in the business. d. make the business more attractive to a buyer. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Ethical Responsibilities KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 81. Jasper is evaluating a business for possible purchase. He needs to know what a fair offering price should be. One way to do this would be to a. ask a business broker for his appraisal. b. search the Internet for information about this business. c. appraise the value of the assets of this business. d. base his offer on the owner’s equity stated on the balance sheet. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 82. The purchase price of a business is determined by negotiation between _____ and _____ a. lender; seller. b. seller; broker. c. buyer; seller. d. lender; buyer. ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 83. When Konrad purchased his business, he purchased it as a total entity. As a result, a. Konrad got only the liquid assets of the business. b. Konrad got both liquid assets and the real estate of the business. c. the seller must pay any outstanding debt held by the business. d. Konrad assumed responsibility for all outstanding debts incurred by the business. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 84. Union contracts are among the many _____ factors in valuing a business. a. nominative b. nonessential c. nonquantitative d. nonqualitative ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Remember 8/29/2018 11:21 AM 1/2/2019 12:44 PM

85. Which of the following factors is a nonquantitative factor in valuing a business? a. Future community development b. Size of the buildings c. Number of employees who will stay with the company d. Employee salaries ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 86. Leonard and the seller have agreed to a price for a business. Leonard cannot pay cash for the entire purchase price, so he applied for a bank loan. The bank is likely to a. check Leonard’s FICO score before granting the loan. b. require the assets of the company to serve as collateral for the loan. c. check the seller’s credit history before approving the loan. d. demand Leonard carry life insurance as a condition of the loan. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 87. Marvin is selling his business as a total entity. The buyer has offered a very large down payment, but Marvin would prefer a lower down payment and a longer repayment period. Which of the following is the most likely reason for this? Copyright Cengage Learning. Powered by Cognero.

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a. To reduce Marvin’s annual tax liability on the profit of the sale b. To allow the buyer time to turn a profit before having to make large payments c. To provide a steady income to Marvin during his retirement d. To avoid capital gains taxes on the sale of the assets ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 88. There are numerous techniques used for valuing a company, but they can be grouped into three basic methods. Which of the following is NOT one of those methods? a. Market-based valuation b. Asset-based valuation c. Expense-based valuation d. Cash flow-based valuation ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 12/28/2018 9:33 AM DATE MODIFIED: 1/2/2019 12:44 PM 89. Define the terms franchising, franchisor, and franchisee. Apply these terms to McDonald's or another franchise example. ANSWER: • Franchising. Franchising is a process for expanding a business and distributing goods and services through a licensing relationship (e.g., the process of ordering, preparing, and serving food using McDonald's selected procedures and suppliers). •

Franchisor. A franchisor is the party in a franchise contract that specifies the methods to be followed and the terms to be met by the other party (e.g.,

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McDonald's). •

Franchisee. A franchisee is the party in a franchise contract that is granted a license to do business under a particular trademark and trade name by the franchisor (e.g., McDonald's local owner/operator).

POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Apply | Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 90. Define the two primary forms of franchising and provide examples for each. ANSWER: 1. Product and trade name franchising. With product and trade name franchising, a franchisor owns the right to a product or trademark and sells that right to a franchisee. Ford automobile dealers, Pepsi-Cola soft drink bottlers, and Chevron convenience stores and service stations are examples of companies engaged in this type of franchising 2. Business format franchising. With "business format franchising," the franchisor often provides a full range of services, including site selection, product supply, marketing plans, and even assistance in obtaining financing. Quick-service restaurants (such as Carl's Jr.), hotels and motels (such as Choice Hotels), and business services (such as Jani-King) typically engage in this type of franchising. POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Apply | Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:28 PM 91. Compare and contrast the functions of a master licensee and area developer. ANSWER: A master licensee is a firm or individual having a continuing contractual responsibility with a franchisor to sell its franchises. This independent company or businessperson is a type of middleman or sales agent responsible for finding new franchisees within a specified territory. Master licensees may provide support services, such as training and warehousing, which are Copyright Cengage Learning. Powered by Cognero.

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more traditionally provided by the franchisor. An area developer is an individual or firm that obtains the legal right to open several franchised businesses in a given area. POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-1 What Is a Franchise? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 92. Discuss the advantages of buying a franchise. ANSWER: The following are advantages to the franchise model: •

•

Established, reputable franchisors offer business models with proven track records. Franchisors have already experienced the situations that an entrepreneur might face when starting a business independently. A good franchisor will likely have a lower failure rate as a result of careful screening of franchise applicants; even potential franchisees who qualify financially are sometimes rejected. Firms that grow through franchising begin with company-owned stores, in which they develop their fundamental business model, leading to a tried-and-true method of operating the business. They document the procedures that work, compile them in an operations manual, and provide the manual to franchisees. Attractive franchisors offer value because they have names and trademarks that are well known to prospective customers. When an entrepreneur becomes a franchise, the franchisor has laid the groundwork. If customers have been satisfied with the products and services they have received from one unit in a chain, they are likely to do business with another store that carries that company's name. When a new franchisee comes on board, franchisors provide detailed operations manuals that explain the specific steps required to operate the enterprise profitably. An operations manual may be the single most valuable tool provided to a franchisee. Following the path laid out in the manual helps the owner avoid mistakes that often occur with a startup business, such as employing unqualified personnel and investing in the wrong equipment or inventory. The franchisee can use the manual to channel his or her energy toward productive activities leading to survival and profitability. Franchisors support their franchisees by providing training, reducing purchasing costs, designing promotional campaigns, and assisting in obtaining capital. The training received from franchisors in invaluable to many small entrepreneurs because it compensates for weaknesses in their managerial skills. Franchising can be a way for existing companies to diversify. Owners of a small business who have achieved success may find themselves in mature industries with limited growth potential. Their current company may provide the resources for acquiring a franchised business in an industry with more opportunities. As managers of a successful enterprise, they may decide that adopting a proven model will lead to faster growth than starting from scratch.

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•

A number of franchisors provide or facilitate financing for franchisees. Some companies have formed alliances to create preferred lending programs for franchisees. The International Franchise Association encourages franchisors to recruit minorities and veterans as franchisees by offering financing incentives. Many prospective franchisees find that they can work with banks to obtain loans guaranteed by the U.S. Small Business Administration (SBA) in order to finance the franchise fee and startup costs. The SBA maintains a registry of franchisors who have gone through an eligibility review service, which speeds up loan processing for franchisees.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:27 PM 93. Why is it important for a new franchisee to follow the business plan detailed in the operations manual? ANSWER: Following the path laid out in the manual helps the owner avoid mistakes that often occur with a startup business, such as employing unqualified personnel or investing in the wrong equipment or inventory. The franchisee can use the manual to channel his or her energy toward productive activities leading to survival and profitability. POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-2 The Pros and Cons of Franchising QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 94. What is due diligence? What are some of the steps involved in the due diligence process? ANSWER: Due diligence is the exercise of reasonable care in the evaluation of a business opportunity. Some of the steps in the due diligence process are: • • •

Identify legal obligations, such as outstanding judgments or tax liens. Make sure all licensing, permits, and zoning requirements are met. Review all existing contracts with suppliers and employees.

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• •

Verify that the company owns all the assets listed on the balance sheet. Review accounting practices, revenue, inventory management, accounts receivable, and previous tax returns.

Determine the value of the business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.02 - LO: 4-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 95. Identify and discuss some of the negative aspects associated with franchises. ANSWER: Concerns of franchising include the following: • • •

•

Financial Issues. Some franchisors may mislead prospective franchisees about earnings opportunities. Churning. Unethical franchisors may engage in churning, or attempting to void the contracts of existing franchisees in order to sell the franchise to someone else and collect an additional fee. Encroachment. A franchisor is said to encroach on a franchisee's territory when the franchisor sells another franchise location within the market area of an existing franchisee. Franchisors may also compete directly against their franchisees. This can occur when the franchisor opens a corporate-owned store near the franchisee's location or sell products via mail or online. Management Issues. The franchise contract can impose limits on the activities of the franchisee, such as limiting sales territories, requiring site approval, imposing requirements regarding the store's appearance, limiting goods and services offered for sale, and limiting advertising and hours of operation.

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96. List and describe the cost components of becoming a franchisee. ANSWER: Franchise costs have several components, all of which need to be recognized and considered. • • •

•

Initial franchise fee. The total cost of a franchise begins with an initial franchise fee, which may range from several hundred to many thousands of dollars. Investment costs. Significant costs may be involved in renting or building an outlet and stocking it with inventory and equipment. Certain insurance premiums, legal fees, and other startup expenses must also be paid. Royalty payments. A royalty is a fee charged to the franchisee by the franchisor. It is calculated as a percentage of the gross income that the franchisee receives from customers for selling the franchised products and services. Royalty fees typically range between 5 and 9 percent. Advertising costs. Most franchisees require that franchisees contribute to an advertising fund to promote the franchise. These fees are generally 1 to 2 percent of sales, sometimes more. Franchisees pay these fees to support the franchisor in establishing the name and reputation of the business in the minds of targeted customers. Successful, well-managed franchise organizations will promote the company and its products and services more cost-efficiently than individual stores could do on their own.

• • • • •

Is the franchisor dedicated to a franchise system as its primary means of product and service distribution? Does the company primarily distribute its goods and services through corporate-owned stores? If so, will the franchisor give as much attention to franchisees as it does to its own outlets? Does the franchisor produce and market quality goods and services for which there is an established consumer demand? Does the franchisor enjoy a favorable reputation and broad acceptance in the industry? Will the franchisor offer an established, well-designed marketing plan and provide substantial and complete training to franchisees? Does the franchisor have good relationships with its franchisees? Do franchisees have a strong franchisee organization that has negotiating leverage

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•

with the franchisor? Does the franchisor have a history of attractive earnings by its franchisees?

POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 98. What options are available to the aspiring franchisee to assist in the evaluation of a franchising opportunity? ANSWER: Basically, three major sources of information should be tapped: (1) independent, third-party sources, such as educational materials, websites, or state offices, (2) the franchisor itself, and (3) existing and previous franchisees. POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-3 Evaluating Franchise Opportunities QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.03 - LO: 4-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 8:29 PM 99. List four reasons for buying an existing business. ANSWER: The reasons for buying an existing business can be condensed into the following four general categories: 1.To reduce some of the uncertainties that must be faced when starting a business from the ground up 2. To acquire a business with ongoing operations and established relationships with customers and suppliers 3. To obtain an established business at a price below what it would cost to start a new business or to buy a franchise 4. To begin a business more quickly than by starting from scratch. POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Essay Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 5:01 AM 100. Identify and discuss four of the seven nonquantitative factors in valuing a business. ANSWER: Students may choose any four of the following: 1. Market. The ability of the market to support all competing business units, including the one to be purchased, should be determined. This requires doing marketing research, studying census data, and personally observing each competitor's place of business. 2. Competition. The prospective buyer should look into the extent, intensity, and location of competing businesses. In particular, the buyer should check to see whether the business in question is gaining or losing in its race with rivals. Additionally, new competitors in the local marketplace may dramatically change an existing small firm's likelihood of success. 3. Future community developments. Future developments in the community that could have an indirect impact on a business include a change in zoning ordinances already enacted but not yet in effect, a change from a two-way traffic flow to a one-way traffic flow, and the widening of a road or construction of an overpass. 4. Legal commitments. Legal commitments may include contingent liabilities, unsettled lawsuits, delinquent tax payments, missed payrolls, overdue rent or installment payments, and mortgages of record on any of the real property acquired. 5. Union contracts. The prospective buyer should determine what type of labor agreement, if any, is in force, as well as the quality of the firm's relationship with its employees. 6. Buildings. The quality of the buildings housing the business should be checked, with particular attention paid to any fire hazards. In addition, the buyer should determine whether there are any restrictions on access to the buildings. 7. Product prices. The prospective owner should compare the prices of the seller's products with those listed in manufacturers' or wholesalers' catalogs and also with the prices of competing products in the locality. This is necessary to ensure full and fair pricing of goods whose sales are reported on the seller's financial statements. POINTS: 1 DIFFICULTY: Hard REFERENCES: 4-4 Buying an Existing Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:21 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/2/2019 12:44 PM

Match the term with its definition. a. area developers b. business brokers c. business format franchising d. churning e. co-branding f. due diligence g. encroach h. master licensee i. multiple-unit ownership j. product and trade name franchising DIFFICULTY: Moderate REFERENCES: 4-1 What Is a Franchise? 4-2 The Pros and Cons of Franchising 4-4 Buying an Existing Business QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 SMAL.LONG.20.04.02 - LO: 4-2 SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 101. Bringing two or more franchise brands together within a single enterprise ANSWER: e POINTS: 1 102. A franchise arrangement whereby the franchisee obtains an entire marketing, management system, and supply geared to entrepreneurs ANSWER: c POINTS: 1 103. To sell another franchise location within the market area of an existing franchise ANSWER: g POINTS: 1 104. Individuals or firms that obtain the legal right to open several franchised outlets in a given area ANSWER: a POINTS: 1 105. Actions by franchisors to void the contracts of franchisees in order to sell the franchise to someone else and collect an additional fee Copyright Cengage Learning. Powered by Cognero.

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ANSWER: d POINTS: 1 106. An independent firm or individual acting as a middleman or sales agent with the responsibility of finding new franchisees within a specified territory ANSWER: h POINTS: 1 107. A franchise agreement granting the right to use a widely recognized product or trademark ANSWER: j POINTS: 1 108. The exercise of reasonable care in the evaluation of a business opportunity ANSWER: f POINTS: 1 109. Specialized brokers that bring together buyers and sellers of businesses ANSWER: b POINTS: 1 Match the term with its definition. a. franchise b. franchise contract c. Franchise Disclosure Document (FDD) d. franchisee e. Franchise Rule f. franchising g. franchisor h. multibrand franchising i. nondisclosure agreement j. piggyback franchising DIFFICULTY: Easy REFERENCES: 4-1 What Is a Franchise? 4-3 Evaluating Franchise Opportunities 4-4 Buying an Existing Business QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.04.01 - LO: 4-1 SMAL.LONG.20.04.03 - LO: 4-3 SMAL.LONG.20.04.04 - LO: 4-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/2/2019 12:44 PM 110. A rule that requires the franchisor to disclose certain information to prospective franchisees Copyright Cengage Learning. Powered by Cognero.

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ANSWER: e POINTS: 1 111. The legal agreement between franchisor and franchisee ANSWER: b POINTS: 1 112. The operation of several franchised businesses within a single corporate structure ANSWER: h POINTS: 1 113. A detailed statement providing information about the franchisor that satisfies the franchise disclosure requirements of the FTC ANSWER: c POINTS: 1 114. The party in a franchise contract that specifies the methods to be followed and the terms to be met by the other party ANSWER: g POINTS: 1 115. A process for expanding a business and distributing goods and services through a licensing relationship ANSWER: f POINTS: 1 116. The operation of a retail franchise within the physical facilities of a host store ANSWER: j POINTS: 1 117. An agreement in which the buyer promises the seller that s/he will not reveal confidential information or violate the seller's trust ANSWER: i POINTS: 1 118. The party in a franchise contract that is granted a license to do business under a particular trademark and trade name by the franchisor ANSWER: d POINTS: 1

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Chapter 05 - The Family Business 1. When a parent retires completely and turns the firm over to a son or daughter, the firm ceases to be a family business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze | Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:00 PM 2. A company run by the great-grandchildren of the founder would be considered a cousin consortium. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 3:57 PM 3. In a family business, the family's primary function is to ensure the profitability and survival of the business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 3:58 PM 4. On average, family businesses survive longer than nonfamily firms. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 5. Husband-and-wife teams that own a business are popularly referred to as co-preneurs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 6. A major factor involved in grooming a son or daughter to enter the family business is the child's right to choose a career. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 7. Some family businesses benefit from effective collaboration among brothers and sisters. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 8. A family business involving two or more children may experience either sibling cooperation or sibling rivalry. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM Copyright Cengage Learning. Powered by Cognero.

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9. One sibling dilemma in a family business has been labeled the predator/parasite conflict. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 10. In-laws not working in the family business may have a bad attitude about the family and its enterprise because of only hearing one side of an argument. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 11. The role of the entrepreneur's spouse in family conflicts can sometimes be described as that of a mediator in business relationships between the entrepreneur and the children. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 12. In the family business, family considerations affect only members of the family. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:00 PM 13. Research has shown that the biggest concern expressed by owners of family businesses about retaining family management is the fear there will be a lack of innovation on the part of successors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 14. When hiring nonfamily employees, the owner should identify the positions, if any, that are reserved for family members. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 15. For families that are not able to develop an atmosphere of neutrality, family retreats are best handled by an outside facilitator, who can help develop an agenda and set ground rules for discussion. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 16. One of the first steps experts recommend for building a healthy family-to-business relationship is to hold a family retreat. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Remember 8/29/2018 11:21 AM 12/29/2018 8:55 PM

17. Even if family members lack the capability to run the business, an entrepreneur should always select a successor from this pool of talent. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:01 PM 18. Research has shown that family-owned businesses tend to devote extra attention to succession planning. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:01 PM 19. When a senior generation member is planning for succession, planning should encompass family members, employees, and the owners. a. True b. False ANSWER: True POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 20. A key responsibility of a younger generation member who desires advancement is to understand that a leadership position in the company is earned and not an entitlement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 21. A family retreat formalizes the participation of the family in the business to a greater extent than a family council does. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

12/29/2018 8:55 PM

22. When transferring ownership of a business, tax considerations tend to favor gradual transfer of ownership to all heirs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 23. When an in-law joins a company, effective collaboration may be achieved by assigning family members to different branches or roles within the company. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:02 PM 24. Federal law permits companies from having policies against hiring family members. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 12/27/2018 9:12 AM DATE MODIFIED: 12/29/2018 8:55 PM 25. Allan opened a hot dog stand in Central Park, New York City. He owns it and operates it six days a week, year round. Which of the following types of business is this? a. A sibling partnership b. A franchise c. A cousin consortium d. An owner-managed business ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 26. Which of the following is a negative of family businesses? a. Close communication among family members b. Long-range thinking by leaders of the firm c. Lack of knowledge among those outside the firm d. None of these are correct. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 12/29/2018 7:40 PM DATE MODIFIED: 1/3/2019 5:02 AM Copyright Cengage Learning. Powered by Cognero.

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27. John and his brother Jack started a produce farm 20 years ago and are thinking about retirement. Over time, their children have worked at the farm and so the cousins have started talking about taking over management. At present, this produce farm is an example of a(n) a. co-preneur-managed business. b. cousin consortium. c. owner-managed business. d. sibling partnership. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 28. Chip and Dale are brothers who have taken over their father's business. This type of family business is known as a(n) a. sibling partnership. b. franchise. c. cousin consortium. d. owner-managed business. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 29. Bret first opened his hardware store in 1946. His sons took over when Bret retired, and now Bret's grandchildren run the store. This type of family business is known as a(n) a. sibling partnership. b. franchise. c. cousin consortium. Copyright Cengage Learning. Powered by Cognero.

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d. owner-managed business. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 30. In a family business, the interests of the family and the interests of the business are best described as a. overlapping. b. conflicting. c. coinciding. d. having no relationship with each other. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 31. The close relationship of business factors and family concerns in a family business are best described as a. separation of domains. b. a generational gap. c. an example of blood being thicker than water. d. overlapping. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 32. In a family business, the family's focus is on emphasizing all of the following EXCEPT a. unity. b. stability. c. flexibility. d. cooperation. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 33. In a family business, the business's goal is to a. create value for family members. b. create value for customers. c. emphasize competition, flexibility, and unity. d. emphasize stability, diversity, and flexibility. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM Copyright Cengage Learning. Powered by Cognero.

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34. A negative often associated with family businesses is when a. nonfamily employees mistrust incompetent family employees. b. nonfamily employees work longer hours than family employees. c. extended family members share knowledge. d. family members share a commitment to the firm. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 35. Recent research findings suggest that companies that are successful in transferring ownership and management from one generation to the next are characterized by a. centralized management. b. diversification. c. transfer of equal ownership shares among all heirs. d. entrepreneurial behavior. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 36. The idea behind _____ is that gains and losses in nonfinancial characteristics of the relationship between the family and the business affect strategic and policy decisions regarding the company. a. co-preneurship b. socioemotional wealth c. nepotism d. altruism ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 37. The socioemotional commitment of family members to the firm occurs along all of the following dimensions EXCEPT a. continuity of the business's legacy. b. identification of family members with the firm. c. binding social ties. d. emotional attachment of family members. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Group Dynamics TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:05 PM 38. Kinder's Deli has been in business for three generations. A place was found for every Kinder child to work in the shop. The name "Kinder" meant "fine deli meats." This family's commitment is based on a. renewal of family bonds. b. identification of family members with the firm. c. binding social ties. d. emotional attachment of family members. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Group Dynamics TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 39. The family endured great hardships together in the old country but vowed they would always watch out for each other in America. Together, they built a thriving business; it was the Muellers against the world. This family's commitment is based on a. family control and influence. b. identification of family members with the firm. c. binding social ties. d. renewal of family bonds to the firm through dynastic succession. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Group Dynamics TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 40. Mayer's philosophy of never using debt to finance operations or expansion was born during the Great Depression and passed on to his sons when they joined the family business. Today, the multi-million-dollar organization proudly follows Mayer's practice under the leadership of Mayer's great-grandsons and -daughters. This family's commitment is based on a. family control and influence. b. identification of family members with the firm. c. binding social ties. d. emotional attachment of family members. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Group Dynamics Operations Management Bloom’s: Analyze 8/29/2018 11:21 AM 12/29/2018 8:55 PM

41. Living above the workshop made it easy to involve the children in the daily business decisions. The children knew from the time they could write they were expected to work in and eventually manage and own the business. This family's commitment to the business is based on a. family control and influence. b. identification of family members with the firm. c. binding social ties. d. renewal of family bonds to the firm through dynastic succession. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Group Dynamics TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 42. Brandon always came in second—in birth order, in school and sports, and in his father's heart. When his older brother decided not to take over the family business as expected, Brandon was paralyzed with fear. This paralysis was likely based on a fear of a. failure. b. success. c. commitment. d. disappointing his friends. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:21 AM 12/29/2018 8:55 PM

43. Betsy had always had decisions made for her, first by her parents and then by her husband. So when her father asked her to take over the family business, she had a fear of a. failure. b. success. c. commitment. d. disappointing her friends. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 44. "The more you can do, the more is expected of you." Josh already had his hands full managing just one of his father’s retail stores. He didn't doubt his ability to do well managing an entire region, but still he was reluctant to accept the assignment. He likely has a fear of a. failure. b. success. c. commitment. d. disappointing his parents. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 45. After college graduation, Terrence was expected to begin working in the family business; however, instead he continued to lead the playboy life, always postponing his decision about working for his father. Terrence probably has a fear of Copyright Cengage Learning. Powered by Cognero.

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a. failure. b. success. c. commitment. d. disappointing others. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 46. The recruiter from IBM made William an offer almost too good to be true. The problem was William's dad, who always expected William to join him in running the family business. William's difficulty in accepting IBM's offer may be based on the fear of a. failure. b. success. c. commitment. d. disappointing his father. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 47. Liam's mentor had worked with him for several months to prepare him for the promotion. Now that the offer has been made, Liam is hesitant. His hesitation is likely based on a fear of a. failure. b. success. c. commitment. d. disappointing his mentor. ANSWER: d Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 48. Fran and Bob (who are married) own and manage a cleaning service. A potential advantage of this arrangement is that a. differences of opinion about the business likely won’t carry over into family lives since they will see each other more hours daily. b. it affords the opportunity to share more of their lives together. c. the business isn’t likely to dissipate their energies as they can each work on separate sections. d. they can count on working fewer hours in the business. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 49. Of all the relationships in a family business, the _____ relationship has been recognized for generations as the most troublesome. a. grandparent–grandchild b. family member employee–nonfamily member employee c. parent–child d. husband–wife ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 50. In considering the role of younger family members, the best philosophy is to recognize that a. a child should have a right to a job in the business if he or she desires. b. no family member should be hired at any level. c. children should have a right to choose their own careers. d. sibling rivalry will always be an issue with second-generation managers. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 51. A common problem for a founder in passing the business on to a daughter or son is a. introducing the child to outsiders such as bankers. b. finding a suitable position for the son or daughter within the business. c. arranging the transition from part-time to full-time employment. d. giving little thought to the child's talent, aptitude, and temperament. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 52. Family business consultants typically advise parents to Copyright Cengage Learning. Powered by Cognero.

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a. subtly, rather than openly, push a child toward a career in the family business. b. let a child work outside the family business, for a time at least, to prove he or she can make it without help from the family. c. introduce children to the family business at a later age. d. never bring siblings into the family business as this will more than likely create competition and conflict. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:06 PM 53. Sibling rivalry in a family business a. rarely affects nonfamily members in the firm. b. may create disagreements about business policy. c. is unusual if roles are determined before the siblings join the business. d. is often good because it spurs business competition within the organization. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 54. Bob and his sister Betty are co-owners of their late parents' business. Bob actively manages the business; Betty supplies capital from her inheritance but does not work in the business. They squabble over the distribution of profits from the business. Bob likely sees his sister as a _____, whereas Betty views her brother as a(n) _____. a. predator; parasite b. co-owner; employee c. parasite; predator d. stockholder; manager ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 55. Tim is married to Susan. Tim's parents are his _____, and Susan's parents are Tim's _____. a. family of attachment; family of origin b. natural family; inherited family c. natural family; extended family d. family of origin; family of attachment ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 56. Researchers have found that one of the most frequent and stressful roles performed by a spouse not employed by the family business is a. making impartial decisions on controversial business. b. providing balance in family matters. c. entertaining potential clients. d. serving as a mediator in business relationships between the entrepreneur and the children. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom’s: Understand 8/29/2018 11:21 AM 12/29/2018 8:55 PM

57. A document that states the principles intended to guide a family firm through times of crisis and change, including the succession process, is called the a. business plan. b. articles of incorporation. c. family business constitution. d. corporate by-laws. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 58. Ideally, the entrepreneur and his or her spouse who is not active in the family business a. form a team committed to the success of both the family and the family business. b. should divide the household duties to keep the entrepreneur involved with the family. c. should insist on maintaining separate domains and spheres of influence. d. All of these are correct. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze | Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 59. To avoid problems with nonfamily employees in a family business, the owner should Copyright Cengage Learning. Powered by Cognero.

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a. consider nonfamily employees before family members when giving promotions. b. avoid all special consideration for family members. c. make clear the extent of opportunities for nonfamily members when hiring them. d. minimize discussion about future management changes. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 60. To protect the interests of both the family and the business in a family business, the owner should a. recognize a basic obligation to supply family members with employment of some type. b. refuse to hire family members but, instead, reward them with generous dividends. c. personally make all personnel decisions affecting family members. d. identify the positions, if any, that are reserved for family members when hiring nonfamily employees. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 61. To ensure the success of a family business retreat, David Lansky, CEO of a family business consulting firm, suggests that which of the following guidelines be followed? a. Give everyone a chance to participate. b. Accomplish as many goals, both small and large, as possible. c. Feel free to deviate from the agenda. d. Always let an outside expert or facilitator coordinate early sessions. ANSWER: a POINTS: 1 DIFFICULTY: Hard Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 62. Which of the following statements about family councils is true? a. A family council should be created before holding a family retreat. b. A family council is the organizational and strategic planning arm of a family. c. The members of a family council should be appointed by the owner of the family business. d. A family council should be looked at as a casual get-together. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 63. The leader of a family-owned enterprise might decide to bring in a nonfamily member as an executive with the firm for which of the following reasons? a. To deal with change. b. To provide new skills and expertise c. To bridge the gap between generations d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Analyze 8/29/2018 11:21 AM 1/3/2019 5:03 AM

64. A family retreat is designed to a. bring family members together to openly discuss family business matters. b. focus on family business matters while avoiding extensive communication. c. control the lines of communication. d. announce the latest policy decisions and other changes in the business. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 65. Which of the following statements about family retreats is true? a. A family retreat should use the founding entrepreneur as a communication facilitator. b. A family retreat should avoid discussing sensitive issues for best results. c. The talk at a family retreat should solely focus on business. d. A family retreat should be one of the first steps implemented for building a healthy family-to-business relationship. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 66. Which of the following usually occurs in the first several meetings of a family council? a. A board of directors is elected. b. A code of ethics is generated. Copyright Cengage Learning. Powered by Cognero.

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c. A family constitution is generated. d. All of these are correct. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 5:04 AM 67. A family business constitution is sometimes labeled a a. business plan. b. by-law guide. c. family creed. d. succession plan. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 68. Which of the following statements about using available family talent in the succession plan is true? a. Younger family members working in the business should realize that mistakes early on in their careers should be considered in their future advancement. b. If the available talent is not sufficient inside the company, the owner must bring in outside leadership or supplement family talent to avoid a decline in the business under the leadership of second- or third-generation family members. c. If a younger family member would like to advance his or her career by working on a new direction for the company, a negative decision by his or her parent means he or she should not discuss his or her ideas with the board of directors. d. It is rare a younger member will have the skill set to rescue a struggling company; therefore, younger members should not be considered for a succession plan. ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 69. Jan and Jill started a business 20 years ago. Jill recently stepped down and her daughter Jenny has agreed to start managing the company with Jan's help. The eventual goal is for Jenny to run the entire company. This process between Jan and Jenny is called a. a sibling partnership. b. a family consortium. c. mentoring. d. nepotism. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:07 PM 70. In preparing for succession, the senior generation has certain responsibilities. One of these is that the a. estate of the senior generation should be settled and audited. b. senior generation should hold the next generation accountable for their actions. c. business should have a formal audit of the financial statements. d. next generation should develop long-term plans for leadership and be held to these plans. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze | Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 71. Devon works at his family's hardware store. He is expected to take over leadership when his father retires. Devon is developing a personal action plan. At this stage, he should seriously assess whether which of the following questions is answered? a. What are my core values? b. Who am I? c. What are the most important areas of my personal and professional life that I should work on? d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze | Bloom’s: Evaluate DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/3/2019 5:04 AM 72. Which of the following actions is best for parents to decrease succession conflict among children active in the firm and those who are not? a. Let those not involved in the company have a larger portion of an inheritance outside of the company, and allow those involved in daily operations have more ownership of the business. b. Let the next generation reach a consensus about management of the company. c. Change the ownership of the company so common (voting) stock is only given to those active in the firm's management and others receive preferred (nonvoting) stock. d. Make decisions based on tax considerations, not what is best for the next generation or the business. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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73. Jim, the founder of a family business specializing in real estate, is contemplating turning the business over to his five children. One possibility, the founder believes, is to divide ownership equally among the children. This action would a. be next to impossible because gaining consensus from that many people is difficult. b. be inherently unfair if any of the children work in the company. c. potentially be inconsistent with the future successful operation of the business. d. require a possible change in corporate structure because the company deals in real estate. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 74. A parent might attempt to resolve a transfer of ownership by giving children active in the firm's management _____ stock and giving nonactive children _____ stock. a. preferred, common b. growth, speculative c. common, preferred d. more, less ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 75. Explain the concept of family and business overlap in a family business. ANSWER: Although the family and the business are separate institutions (each with its own members, goals, and values), they overlap in the family firm. Families and businesses exist for fundamentally different reasons. The family's primary Copyright Cengage Learning. Powered by Cognero.

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function is the care and nurturing of family members, while the business is concerned with the production and distribution of goods and/or services. And while the family's focus is on creating value for family members and emphasizing cooperation, unity, and stability, the business's goal is to create value for customers and emphasize competition, diversity, and flexibility. Because relationships among family members in a business are more sensitive than relationships among unrelated employees, competing interests can complicate the management process. Tension that is created may sometimes lead to conflict. POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 76. Explain the role of the entrepreneur's spouse as it affects a family business. ANSWER: Even if a spouse does not work in the business, he or she may still play a critical role behind the scenes. As a parent, the spouse helps prepare the children for possible careers in the family business. One of the most frequent and stressful roles performed by the spouse is to serve as a mediator in business relationships between the entrepreneur and the children. Ideally, the entrepreneur and her or his spouse form a team committed to the success of both the family and the family business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-3 Family Roles and Relationships QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.05.03 - LO: 5-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 77. What actions must be taken by the current and next generation when preparing for succession? ANSWER: Successful management and ownership transitions require thoughtful action by both the current and future leadership teams. Listed below are some topics that the current generation should consider and some steps it should take: 1. Communication. Parents need to listen and ask questions. Communication can be used to build trust and to convey values. Providing support and feedback are Copyright Cengage Learning. Powered by Cognero.

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important, but not just in a one-way direction. 2. Planning. Not only should the company's vision be articulated, but also the family's values and even the plan for settling the estate of the current generation. Planning should encompass family members, employees, and owners. 3. Accountability. The next generation should be held accountable for their actions, especially those that relate to credibility and integrity. 4. Owner development. To prepare the next generation to participate in the governance of the firm, the current generation should be specific about the job structure of an active owner-manager or board member. 5. Long-term planning. When asking the next generation to develop long-term plans that will prepare them for leadership, the current generation of leaders must simultaneously prepare their own plans. Such plans should take into account future business development, boards of directors and advisers, family councils, and other structures. If prospective future leaders of the family enterprise expect to advance to executive positions, they must proactively engage in their participation by doing the following: 1. Be open to communication. The succeeding generation should understand the values that led to the creation and growth of the family enterprise and to its current mission. If they believe change is necessary, their actions should result from conscious decisions. They should seek to be fully informed about the history and direction of the company. 2. Develop a personal action plan. At this stage, prospective successors should seriously assess whether they have addressed the following questions: Who am I? What are my core values? What are the most important areas of my personal and professional life that I should work on? 3. Implement the personal action plan. This involves pursuing relevant education, training, and experience. Actions should lead to the establishment of personal credibility and marketability. 4. Prepare for ownership. Future leaders need to develop basic management skills, such as the ability to comprehend financial statements and to effectively supervise employees. They must grasp the role of a board of directors in terms of its relationship to the management team of the firm. And they need to understand the relationship between the business and the family. 5. Design life plans. Life plans are for both the individual and the business. What should the résumé of the family company CEO look like in 5 or 10 years?

POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-5 The Process of Leadership Succession QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:07 PM Copyright Cengage Learning. Powered by Cognero.

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78. Identify the six positives of a family business. ANSWER: 1. Trust among family members 2. Loyalty to the family 3. Commitment by those within the firm 4. Knowledge among extended family members 5. Long-range thinking by leaders of the firm 6. Close communication among family members POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-1 What Is a Family Business? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 79. The socioemotional commitment of family members to a firm occurs along five dimensions. What is the acronym for these dimensions, and what do the letters in the acronym stand for? ANSWER: The acronym is FIBER, and the five dimensions are: Family control Identification with the firm Binding social ties Emotional attachment Renewal of family bonds through dynastic succession POINTS: 1 DIFFICULTY: Moderate REFERENCES: 5-2 Dynamic Family Businesses QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.05.02 - LO: 5-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM 80. Discuss guidelines for a successful family business retreat. ANSWER: To ensure the success of a family retreat, David Lansky, CEO of a family business consulting firm, suggests these guidelines be followed: 1. Be clear about the purpose of the retreat. Be able to answer this question: "If the meeting accomplished everything you could possibly hope for, what would that look Copyright Cengage Learning. Powered by Cognero.

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2. 3. 4. 5.

like?" Set small, attainable goals. Don't look at the retreat as having to accomplish all possible goals. Use an agenda, and stick to it. Schedule the meeting for a fixed period of time, and appoint someone to take notes. Give everyone a chance to participate. This is a critical step in establishing trust among the participants. People need to feel that they have been heard. Know the difference between consensus and agreement. Participants don't have to see things the same way (agreement) in order to concur on a course of action (consensus).

POINTS: 1 DIFFICULTY: Hard REFERENCES: 5-4 Good Governance in the Family Firm QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.05.04 - LO: 5-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 12/29/2018 8:55 PM Match the term to its definition. a. co-preneurs b. cousin consortium c. family d. family business e. family business constitution f. family council g. family retreat h. nepotism i. organizational culture j. owner-managed business k. sibling partnership l. socioeconomic wealth m. transfer of ownership DIFFICULTY: Moderate REFERENCES: 5-1 What Is a Family Business? 5-2 Dynamic Family Businesses 5-3 Family Roles and Relationships 5-4 Good Governance in the Family Firm 5-5 The Process of Leadership Succession QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.05.01 - LO: 5-1 SMAL.LONG.20.05.02 - LO: 5-2 Copyright Cengage Learning. Powered by Cognero.

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SMAL.LONG.20.05.03 - LO: 5-3 SMAL.LONG.20.05.04 - LO: 5-4 SMAL.LONG.20.05.05 - LO: 5-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:21 AM DATE MODIFIED: 1/1/2019 4:09 PM 81. The practice of employing relatives ANSWER: h POINTS: 1 82. A business in which children of the founder become owners and managers ANSWER: k POINTS: 1 83. An organization in which either the individuals who established or acquired the firm or their descendants significantly influence the strategic decisions and life course of the firm ANSWER: d POINTS: 1 84. Couples who own and manage businesses ANSWER: a POINTS: 1 85. An informal gathering of family members, usually at a remote location, to discuss family business matters ANSWER: g POINTS: 1 86. Nonfinancial factors in a family firm that affect the commitment of family members to the business ANSWER: l POINTS: 1 87. A statement of principles intended to guide a family firm through times of crisis and change ANSWER: e POINTS: 1 88. An organized group of family members who gather periodically to discuss family-related business issues ANSWER: f POINTS: 1 89. A pattern of behaviors and beliefs that characterize a particular firm ANSWER: i POINTS: 1 90. A group of people bound by a shared history and a commitment to share a future together, while supporting the development and well-being of individual members Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 91. A business in third and subsequent generations, when children of the siblings take ownership and management positions ANSWER: b POINTS: 1 92. Passing ownership of a family business to the next generation ANSWER: m POINTS: 1

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Chapter 06 - The Business Plan: Visualizing the Dream 1. A business plan is a document that outlines the basic concept underlying a business—specifically, what problem will be solved—and describes how the entrepreneur will execute the plan to solve the problem. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 2. A business plan provides evidence that a business can sell enough products or services to make an attractive profit. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 3. Writing an effective plan is more helpful for company insiders than for outsiders. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 4. There is no current formula for preparing a business plan. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 5. A business plan should always be written before deciding to go forward with a startup business idea. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 6. An extensive business plan that is not executed is more valuable than no business plan at all. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 7. Time and capital are factors that affect the extent of business plan preparation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 8. Once the decision is made to prepare a business plan, it should always be a comprehensive plan. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM Copyright Cengage Learning. Powered by Cognero.

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9. Investors are only interested in reading a comprehensive business plan before deciding about the investment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 10. A business model's key resource requirements include only the amount of investment in hard assets, such as equipment and buildings, not personnel and contacts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 11. A business model explains how a business will generate profits and cash flow. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 12. A loss leader is a revenue stream that is sold at a loss to create sales in a more profitable revenue stream. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 13. The executive summary of a business plan presents a firm's history and its form of organization. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 14. The financial plan section of a business plan should include balance sheets and income statements on an annual basis and statements of cash flows on a monthly basis, all projected out for two to three years. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Finance KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 15. Pro forma financial statements reflect the past financial performance of a firm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Finance KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 16. While every financial statement is important, the pro forma statement of cash flows deserves special attention. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Finance KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM Copyright Cengage Learning. Powered by Cognero.

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17. A business plan should not mention competitors' strengths and weaknesses. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 18. A narrative is more appropriate for businesses that are breaking new ground with a new product, a new market, or new operational techniques. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 19. Investors are more product-oriented than market-oriented. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 20. When writing a business plan, it is important for an entrepreneur to think of his or her assumptions as facts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 21. A product or service should be described in lay terms even if the product is technical in nature. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 22. Even if the business plan reveals sensitive information (e.g., details of a technological design or the specifics of a marketing strategy), prospective investors can be trusted with that knowledge. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 23. Incubator organizations can provide advice on structuring a new business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-7 Resources for Business Plan Preparation QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.07 - LO: 6-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 24. With the right assistance from professional sources (e.g., attorneys, accountants, incubator organizations) in business plan preparation, the entrepreneur can be relieved of having the responsibility of being the primary planner. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-7 Resources for Business Plan Preparation QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.07 - LO: 6-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/1/2019 9:49 PM

25. The purpose of the pitch is to close the deal with the investors. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-6 Pitching to Investors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.06 - LO: 6-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 26. A business plan can be thought of as a a. crystal ball picture. b. money plan. c. contingency plan. d. game plan. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 27. Outside users of business plans include _____ and _____. a. employees; leaders b. investors; customers c. managers; investors d. government agencies; employees ANSWER: b POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 28. At a minimum, a business plan should include all of the following elements EXCEPT a. a significant amount of hard evidence. b. a primary focus on the product(s) the entrepreneur is selling. c. candor about the risks, gaps, and assumptions that might be proved wrong. d. a logical statement of a problem and its solution. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 29. Jill is writing a business plan for a small home-based operation. If well written, the business plan will assist her in determining if a. the business aligns with her personal goals. b. an investor would be a perfect fit for the proposed company. c. suppliers can be found for the operation. d. outsiders can be made into insiders. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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30. The document that provides a framework that helps an entrepreneur and the management team focus on important issues and activities for the new venture is the a. organization chart. b. budget. c. sales analysis. d. business plan. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 31. A business plan a. is best for telling insiders about the company. b. is more important than the final outcome. c. is not the business. d. will ensure success. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 32. A business plan is more likely to make a difference when the entrepreneur and management team a. identify all unexpected events. b. make decisions realizing that change may hurt the new company. Copyright Cengage Learning. Powered by Cognero.

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c. understand the plan is static. d. effectively execute the plan. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 33. An extensive business plan would be most helpful for a startup that a. will be operating in a turbulent environment. b. needs to become operational as soon as possible. c. needs to secure funding. d. is severely constrained by a shortage of capital. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 34. Capital-constrained entrepreneurs cannot afford to do much prior analysis and research because a. the affordability of properly conducted research is beyond the means at their disposal. b. the costs of any mistakes are lower than the risks of missing out on opportunistic actions. c. the limited profit potential and high uncertainty of the opportunity they usually pursue may make the benefits low compared to the costs. d. potential competitors could quickly discern the entrepreneurs’ intentions and motives from their research. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 35. Two resources that are always in short supply for entrepreneurs are _____ and _____. a. time; money b. raw materials; labor c. plant; equipment d. financial backing; creative genius ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 36. Because Tom is planning a new business with a limited time frame to capture an opportunity, the best solution would be a _____ business plan. a. comprehensive b. narrative c. subjective d. short ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM Copyright Cengage Learning. Powered by Cognero.

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37. The most beneficial plan when facing significant change in the external environment is a _____ plan. a. comprehensive b. narrative c. subjective d. short ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 38. Which of the following issues would NOT be addressed in a short plan? a. The problem that needs to be solved for customers b. An in-depth analysis of critical factors c. Measures used to gauge success d. Milestones to be met ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 39. Before beginning to write a business plan, the entrepreneur should complete a a. thorough market analysis. b. feasibility analysis. c. patent application. d. technical writing course. ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 40. Which of the following key factors should a comprehensive business plan consider? a. Opportunity b. Critical resources c. Financing structure d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 41. Cost structures of a business model a. define the types of income. b. determine how much money is needed for positive cash flow. c. drive the company's cost of goods sold and expenses. d. are the most critical components for long-term success. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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42. A business model a. is only important for startups with a large amount of uncertainty. b. is intended to provide evidence on whether a concept is viable, not if it can be profitable. c. is made up of a revenue model, cost structures, and required resources to grow the business. d. forces the entrepreneur to be more disciplined about financial projections. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 43. When considering the content of a comprehensive business plan, an entrepreneur should think first and foremost about a. the opportunity, as identified by his or her feasibility analysis. b. formulating effective strategies and financial projections. c. who will be reviewing the plan. d. how to protect the confidentially of the plan. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 2:15 PM 44. With a(n) _____ revenue model, customers pay a fixed price per unit in exchange for a product or service. a. volume b. subscription/membership Copyright Cengage Learning. Powered by Cognero.

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c. advertising-based d. licensing ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 45. The discussion of the opportunity in the business plan should reflect a. how the product or service will fill a need. b. the amount of return the investors should receive. c. the potential and attractiveness of the market and industry. d. the entrepreneur's enthusiasm for the business idea. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 46. When determining a cost structure for a business model, equipment lease payments would be an example of a _____ cost. a. fixed b. variable c. semi-variable d. static ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 47. An entrepreneur should think of ways to _____ the resources necessary for startup. a. outsource b. insure c. maximize d. minimize ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 48. The subscription/membership revenue model would require customers to pay a a. fraction of the true value of the product or service. b. fixed amount at regular intervals, prior to receiving the product or service. c. fixed price per unit in exchange for a product or service. d. one-time fee to be able to use a product or service. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM Copyright Cengage Learning. Powered by Cognero.

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49. Presenting a business plan with a unique format could be a mistake because a. the business plan is not the right place to express one's creativity. b. investors like to see the plan in a format that is familiar to them. c. investors may lose confidence in the entrepreneur's ability to follow best practices. d. investors don't appreciate opportunities that are too far "outside the box." ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 50. Which of the following questions is key for forecasting revenues? a. Who are the most likely customers? b. What events will trigger the need or desire for the type of product or service? c. How will customers make decisions on whether to buy the product or service? d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 51. Martin is creating the part of his business plan that includes the name, address, website, and logo of his company. Martin is working on the a. cover page. b. table of contents. c. executive summary. d. company description. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 52. The _____ of a business plan provides a sequential listing of the sections and their page numbers. a. executive summary b. company description c. cover page d. table of contents ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 2:15 PM 53. Which of the following is often thought to be the most important section of a business plan? a. Financial plan b. Company description c. Executive summary d. Operating plan ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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54. The executive summary part of a business plan should be written a. first. b. last. c. before the financial plan. d. before the operations and development plan. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 55. The type of executive summary that briefly covers all aspects of the business plan, giving each topic relatively equal treatment, is the ____ executive summary. a. narrative b. synopsis c. abbreviated d. comprehensive ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 56. The _____ type of executive summary is more appropriate for a business that intends to market a new product or enter a new market. Copyright Cengage Learning. Powered by Cognero.

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a. informative b. synopsis c. narrative d. blended ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 57. In a business plan, the legal form of organization would be discussed in the a. financial plan. b. company description. c. executive summary. d. marketing plan. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 58. The narrative form of an executive summary a. is more straightforward than the synopsis form. b. allows the author to include hyperbole that builds enthusiasm. c. is a better format for ventures that have several dominant advantages. d. works well for companies with impressive histories. ANSWER: d POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 2:16 PM 59. The company description section of a business plan should include the company's _____ if the business is already in existence. a. history b. customer list c. sales revenues d. credit score ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 60. The industry, target customer, and competitive analysis section should a. begin to describe the company. b. present the opportunity and demonstrate why there is a significant market to be served. c. introduce the product or service the company will offer. d. identify the company's objectives for sales and growth. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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61. The product/service plan section should include a a. description of the competition's products and/or services. b. description of the products and/or services. c. listing of the weaknesses of the competition's product and/or services. d. statement of how the company intends to capture market share. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 62. The marketing plan should include which of the following topics? a. Pricing strategies b. The degree of patent or copyright protection c. The spending habits of potential customers d. Competitors' existing distribution channels ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember | Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 63. In a business plan, the facilities and location of the proposed venture are described in the a. executive summary. b. management team section. c. operations and development plan. Copyright Cengage Learning. Powered by Cognero.

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d. product/service plan. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 64. Nelson is writing about how he will identify and attract customers, how he will price his product, and how and where he will offer it for sale. Nelson is working on the _____ section of his business plan. a. customer service b. product/service plan c. marketing plan d. development plan ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 65. Orlando has just finished the section describing his quality control methods and the need for specific equipment. Orlando has written the a. management team section. b. marketing plan. c. company description. d. operations and development plan. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 66. Of all the factors that investors consider, the _____ is/are paramount. a. entrepreneur's educational achievements b. quality of the management team c. firm's competitive advantage d. firm's target market ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 67. Information about the backgrounds of key employees should be placed in the _____ of the business plan. a. executive summary b. management team section c. operations and development plan d. critical risks section ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM Copyright Cengage Learning. Powered by Cognero.

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68. In a business plan, the management team section should detail a. the proposed venture's organizational structure. b. profiles of employee needs during the first three years of operation. c. the projected growth of the proposed venture. d. the intended distribution of ownership in the firm. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 69. Prentiss is writing about the potential lack of customer acceptance of his product and possible retaliations from competitors. Prentiss is writing the _____ of the business plan. a. critical risks section b. executive summary c. marketing plan d. exit strategy ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 70. The sources and uses table is a part of the _____ of the business plan. a. critical risks section b. offering section c. exit strategy d. financial plan ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 71. Quentin, a venture capitalist, is scanning Mildred's business plan to see if and when he can recoup his investment and make a profit. Quentin is looking for a(n) a. financial plan. b. marketing plan. c. investment plan. d. exit strategy. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 72. In the financial plan section of a business plan, pro forma statements should be presented for a. six months. b. one year. c. three to five years. d. seven years. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Finance Bloom’s: Remember 8/29/2018 11:22 AM 1/1/2019 9:49 PM

73. In a business plan, the key statement in the financial plan is the a. break-even analysis. b. estimate of returns and allowances. c. salary expense statement. d. statement of cash flows. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Finance KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 74. Items such as marketing research studies and the résumés of key executives are placed in the _____ of the business plan. a. appendix b. executive summary c. table of contents d. management team section ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 75. In analyzing the market for her or his product, an entrepreneur should answer which of the following questions? Copyright Cengage Learning. Powered by Cognero.

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a. How strong is the patent protection? b. How costly will it be to produce the product? c. How much are customers willing to pay for the product? d. All of these are correct. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/3/2019 5:06 AM 76. One of the primary goals of a prospective investor is to a. make as much money as possible. b. minimize losses. c. avoid risk at all costs. d. maximize potential return on an investment. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 77. When dealing with weaknesses in a business plan, the entrepreneur should a. use technical jargon to confuse readers. b. ignore them because they might not attract investors. c. assume that investors will not find them. d. be straightforward with them and have an action plan. ANSWER: d POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 78. Which of the following statements about the appearance of a business plan is true? a. The plan should be presented in a three-ring, loose-leaf binder. b. Visual aids, such as exhibits and tabular summaries, should be used conservatively. c. The plan should be bound like a book. d. The plan should be printed on shiny paper with flashy images and graphs. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 79. Plans that appeal effectively to investors are a. long and thorough. b. market-oriented. c. product-oriented. d. ten or fewer pages. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/1/2019 9:49 PM

80. When describing the product in the business plan, the entrepreneur should a. use technical terms. b. state that the product will sell itself. c. use lay terms. d. assume that others will like the product. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 81. What do the numbers stand for in Guy Kawasaki's 10/20/30 rule for pitches? a. Number of attendees/slides/minutes b. Number of selling points/slides/font point size c. Number of slides/minutes/font point size d. Number of visual aids/slides/minutes ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-6 Pitching to Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.06 - LO: 6-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 82. Business plan software packages a. focus mostly on preparing slides to present the business concept to prospective investors. b. spawn creativity and flexibility on the part of the entrepreneur. c. help an entrepreneur think through the important issues in starting a new company. d. offer a simple formula that leads startups to success. ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-7 Resources for Business Plan Preparation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.07 - LO: 6-7 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 83. Jim is developing a business plan and has limited funds. Which of the following individuals would be the best fit to offer assistance to Jim? a. A lawyer specializing in business plans b. A SCORE representative c. A consultant in the industry Jim is trying to enter d. An accountant ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-7 Resources for Business Plan Preparation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.07 - LO: 6-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 84. Julie has decided to hire a consultant to review her business plan. Which of the following suggestions should Julie heed? a. Ask colleagues, acquaintances, and professionals such as bankers, accountants, and lawyers for the names of business plan consultants they recommend. b. Get the names of at least three clients the consultant has helped to write business plans. c. Have a legal contract that contains a detailed written description of what the consultant must do to earn the fee. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-7 Resources for Business Plan Preparation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.07 - LO: 6-7 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/3/2019 5:06 AM 85. Eric Ries and Steve Blank popularized a concept that can make the process of starting a new venture less risky by using an interactive process, which they called a. a lean startup. b. pivoting. c. the build-test-retest loop. d. a value proposition. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 86. Jerry is starting an athletic apparel store, with his brother-in-law providing all funding. Identify possible insiders and outsiders and explain how each would use a business plan. ANSWER: Insiders would include Jerry, his management team, and the store's employees. Outsiders could include potential customers, apparel suppliers, and his lender if he will have a bank loan. Outsiders would also include his brother-in-law and other investors, such as his family, friends, private investors, or a venture capitalist. The business plan provides a framework that helps Jerry and the management team focus on important issues and activities for the new venture. And it helps Jerry communicate his vision to the employees of the firm. The business plan would also be used to convince outsiders to partner with the firm. It should convince them why they should do business with Jerry instead of a more established firm and provide evidence that the firm will be around in the future. POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-1 An Overview of the Business Plan QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Strategy Bloom’s: Apply 8/29/2018 11:22 AM 1/1/2019 9:49 PM

87. Describe the two types of business plans and state which plan would be appropriate for a proposal for a new bed and breakfast inn for a rural area. ANSWER: A short plan is an abbreviated form of the traditional business plan that addresses only the most important issues in a firm's success, including the following: • • • • • •

The problem that needs to be solved for customers The business strategy that will be used to solve the problem The business model Measures used to gauge success Milestones to be met The tasks and responsibilities of the management team

A comprehensive plan is a complete business plan that provides an in-depth analysis of the critical factors that will determine a firm's success or failure, along with the underlying assumptions. Considering the complexity of starting an inn, the comprehensive plan would be better. POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 88. Janice is opening a golf shop and is trying to identify how the company would gain revenue. What type of revenue stream could Janice's Golf Shop have? ANSWER: A golf shop could have a single stream if only apparel is offered for sale. However, many golf shops offer more than just apparel. The shop might offer golfing equipment and supplies, creating interdependent streams. Janice might offer lessons at the store, creating multiple streams. Janice may have a loss leader revenue stream if she decides to offer an item at a low price (that results in a loss for the store) in hopes that other income could be made by the golfer buying other higher profit items. POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-3 Begin With the Business Model QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.03 - LO: 6-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUS PROG: Reflective Thinking Strategy Bloom’s: Apply 8/29/2018 11:22 AM 1/1/2019 9:49 PM

89. Why is the executive summary so important for a business plan? What should be included in the executive summary? ANSWER: The executive summary, or overview, is often thought to be the most important section of the business plan. If an entrepreneur doesn't catch the readers' attention in the executive summary, most likely they will not continue reading. At the very outset, it must convey a clear and concise picture of the proposed venture and create a sense of excitement regarding its prospects. Even though the executive summary comes at the beginning of the business plan, it provides an overview of the entire plan and should be written last. In no more than three (preferably two) pages, the executive summary should include the following subsections: • • • • • • • •

A description of the opportunity An explanation of the business concept An industry overview The target market The competitive advantage you hope to achieve in the market The economics of the opportunity The management team The amount and purpose of the money being requested (the "offering"), if you are seeking financing

POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 2:18 PM 90. Discuss each pro forma statement in the financial plan in terms of time frame. Which of these pro forma statements deserve special attention in the financial plan, and why? ANSWER: Pro forma statements, which are projections of the company's financial statements, should be presented for at least three years and possibly up to five years. The forecasts ideally include balance sheets, income statements, and statements of cash flows on an annual basis for three to five years, as well as cash budgets on a monthly basis for the first year and on a quarterly basis for the second and third years. While every financial statement is important, the pro forma statements of cash flows deserve special attention, because a business can be profitable but fail if it does not produce positive cash flows. A well-prepared statement of cash flows identifies the sources of cash—that is, Copyright Cengage Learning. Powered by Cognero.

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how much will be generated from operations and how much will be raised from investors. It also shows how much money will be devoted to investments in areas such as inventories and equipment. The statement of cash flows should clearly indicate how much cash is needed from lenders and prospective investors and for what purpose. POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Finance KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 91. List five questions that a possible investor would want answered concerning the market of the new business. ANSWER: Possible questions may include: • • • • • • • • •

What is the target market? How large is the target market? What problems concern the target market? Are any of these problems greater than the one you're addressing? How does the product or service fix the problem? Who will buy the product or service? How much is the target market willing to pay for it? Why do they need it? Why would they buy from you?

POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-5 Advice for Writing a Business Plan QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.05 - LO: 6-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 92. List and briefly discuss suggestions for avoiding costly mistakes when hiring a business plan consultant. ANSWER: The following suggestions may help an entrepreneur avoid some costly mistakes when hiring a consultant: 1. Get referrals. Ask colleagues, acquaintances, and professionals such as bankers, Copyright Cengage Learning. Powered by Cognero.

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accountants, and lawyers for the names of business plan consultants they recommend. 2. Look for a fit. Find a consultant who is an expert in helping businesses like yours. Ideally, the consultant should have lots of experience with companies of smaller size and age in related industries. Avoid general business experts or those who lack experience in your particular field. 3. Check references. Get the names of at least three clients the consultant has helped to write business plans. Call the former clients and ask about the consultant's performance. 4. Get details in writing. Have a legal contract outlining the consultant's services. It should state in detail the fee, when it will be paid, and under what circumstances. And make sure you get a detailed written description of what the consultant must do to earn the fee. POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-7 Resources for Business Plan Preparation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.07 - LO: 6-7 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 93. Discuss situations where an extensive business plan might not be helpful. ANSWER: The benefits of having a business plan depend on the circumstances surrounding the startup. The following are situations where an extensive business plan may not be very helpful: •

• •

For some startups, the environment is too turbulent for extensive planning to be beneficial. Entrepreneurs in new fields may find that there is too much uncertainty and too little good information to allow them to write a comprehensive plan. In this case, an entrepreneur's ability to adapt may be more important than a careful plan. Planning may pose a problem when the timing of the opportunity is a critical factor. Becoming operational as quickly as possible may have to take priority over in-depth planning. A business may be so constrained by a shortage of capital that planning is not an option.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 6-2 Will Writing a Plan Make a Difference? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:22 AM 1/1/2019 9:49 PM

Match the term with its definition. a. business model risk b. comprehensive plan c. cost structures d. executive summary (overview) e. exit strategy section f. key resource requirements g. management team section h. offering i. operations and development plan j. pivoting k. pro forma statements DIFFICULTY: Easy REFERENCES: 6-2 Will Writing a Plan Make a Difference? 6-3 Begin With the Business Model 6-4 Preparing a Business Plan: The Content and Format QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.02 - LO: 6-2 SMAL.LONG.20.06.03 - LO: 6-3 SMAL.LONG.20.06.04 - LO: 6-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 9:49 PM 94. A complete business plan that provides an in-depth analysis of the critical factors that will determine a firm's success or failure, along with the underlying assumptions ANSWER: b POINTS: 1 95. The types and amounts of resources required to achieve positive profits and cash flows ANSWER: f POINTS: 1 96. A section of the business plan that conveys a clear and concise overall picture of the proposed venture and creates interest in the venture ANSWER: d POINTS: 1 97. Projections of a company's financial statements for up to five years, including balance sheets, income statements, and statements of cash flows, as well as cash budgets Copyright Cengage Learning. Powered by Cognero.

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ANSWER: k POINTS: 1 98. A section of the business plan that describes a new firm's organizational structure and the backgrounds of its key employees ANSWER: g POINTS: 1 99. A section of the business plan that offers information on how a product will be produced or a service provided, including descriptions of the new firm's facilities, labor, raw materials, and processing requirements ANSWER: i POINTS: 1 100. A component of the business model that provides a framework for estimating a firm's cost of goods sold and operating expenses ANSWER: c POINTS: 1 101. A section of the business plan that focuses on options for cashing out of the investment ANSWER: e POINTS: 1 102. A component of the business model that identifies potential risks in the model and how the model can adjust to them ANSWER: a POINTS: 1 103. A section of the business plan that indicates to an investor how much money is needed, and when and how the money will be used ANSWER: h POINTS: 1 Match the term with its definition. a. business model b. business plan c. critical risks section d. financial plan e. lean startup f. marketing plan g. pitch h. product/service plan i. revenue model j. short plan k. value proposition DIFFICULTY: Easy REFERENCES: 6-1 An Overview of the Business Plan 6-2 Will Writing a Plan Make a Difference? 6-3 Begin With the Business Model 6-4 Preparing a Business Plan: The Content and Format Copyright Cengage Learning. Powered by Cognero.

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6-6 Pitching to Investors QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.06.01 - LO: 6-1 SMAL.LONG.20.06.02 - LO: 6-2 SMAL.LONG.20.06.03 - LO: 6-3 SMAL.LONG.20.06.04 - LO: 6-4 SMAL.LONG.20.06.06 - LO: 6-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 1/1/2019 2:34 PM DATE MODIFIED: 1/1/2019 9:49 PM 104. An abbreviated business plan that presents only the most important issues in a firm's success ANSWER: j POINTS: 1 105. A section of the business plan that projects the company's financial position based on well-substantiated assumptions and explains how the figures have been determined ANSWER: d POINTS: 1 106. A document that outlines the basic concept underlying a business and describes how that concept will be realized ANSWER: b POINTS: 1 107. A component of the business model that identifies the nature and types of a company's sources of revenue ANSWER: i POINTS: 1 108. A section of the business plan that describes the product and/or service to be provided and explains its merits ANSWER: h POINTS: 1 109. A section of the business plan that identifies the potential risks that may be encountered by an investor ANSWER: c POINTS: 1 110. A section of the business plan that describes how the firm will reach and service customers within a given market ANSWER: f POINTS: 1 111. An analysis of how a firm plans to create profits and cash flows given its revenue sources, its cost structures, the required size of investment, and sources of risk ANSWER: a POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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112. A statement of how a company creates value for its customers compared with its competitors, which provides the basis for the company's competitive advantage ANSWER: k POINTS: 1 113. An oral presentation of the business idea to investors ANSWER: g POINTS: 1

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Chapter 07 - The Marketing Plan 1. Small business marketing is best defined as the performance of distribution activities that affect the flow of goods and services from producer to consumer or user. a. True b. False ANSWER: False RATIONALE: Small business marketing involves numerous activities, many of which occur even before a product is created or made ready for distribution or sale. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 2. A consumer-oriented philosophy is used more often by firms than a production-oriented philosophy or a sales-oriented philosophy. a. True b. False ANSWER: False RATIONALE: As suggested by the consumer-oriented philosophy, a firm must also pursue customer satisfaction if it is to be successful. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 3. Consumer orientation is put into practice by applying a two-stage process that underlies all marketing efforts: identifying customer needs and satisfying those needs. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 4. An entrepreneur with a strong background in sales but weak in marketing will most likely focus on marketing to compensate for his or her lack of knowledge in the area. a. True b. False ANSWER: False RATIONALE: Many small business owners have strong production skills and are weak in marketing ability, and therefore they attend primarily to production considerations. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 5. If a business owner envisions several target markets, each segment must have a corresponding customer profile. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:22 AM 1/1/2019 4:33 PM

6. A brief discussion of competitor's overall strengths and weaknesses should be part of a firm's marketing plan. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 7. The information on marketing strategy forms the most detailed section of a marketing plan. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 8. It is best to write a marketing plan before collecting and evaluating marketing research data. a. True b. False ANSWER: False RATIONALE: A marketing plan is stronger with marketing research as a foundation. POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 9. The most difficult forecasting situation is when an entrepreneur is inexperienced and has a new idea. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:04 PM 10. Marketing research is defined as the gathering, processing, interpreting, and reporting of marketing information. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 11. A small business typically conducts less marketing research than a big business, partly because the entrepreneur does not understand the basic research process. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 12. Researchers typically achieve higher response rates from mail and telephone surveys than from personal interviews. a. True b. False ANSWER: False RATIONALE: Personal interviews and telephone surveys typically achieve higher response rates than mail surveys. POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 13. Because of the considerable cost, time, and effort, pretesting is generally considered necessary only in the case of extensive, complex questionnaires. a. True b. False ANSWER: False RATIONALE: A questionnaire should be pretested by administering it to a small, but representative, sample of respondents. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 14. Personal interview surveys are attractive as a marketing research method because these are inexpensive to conduct. a. True b. False ANSWER: False RATIONALE: Personal interview surveys are expensive, especially compared to alternatives such as mail and telephone surveys. POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 15. Inexpensive personal computer software is now available to perform statistical calculations and generate report-quality graphics. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Data Analysis Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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16. Marketing research should be viewed as a supplement to, not a replacement for, good judgment and cautious experimentation in launching new products and services. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 17. A market is best defined as a geographical area that is of commercial interest to the entrepreneur. a. True b. False ANSWER: False RATIONALE: A market is a group of customers or potential customers who have purchasing power and unsatisfied needs. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 18. Determining market potential is the process of locating and investigating buying units that have both purchasing power and needs that can be satisfied with the product or service that is being offered. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 19. When a strategist divides the total market for a product or service into smaller groups with similar needs, such that each group is likely to respond favorably to a specific marketing strategy, he or she is engaging in a practice called market segmentation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 20. Because of the relatively inconsequential amount of sales conducted by a typical small business, the majority of entrepreneurs need not be concerned with formulating accurate sales forecasts. a. True b. False ANSWER: False RATIONALE: A sales forecast is a critical component of the business plan: therefore, entrepreneurs should engage in forecasting and do so with great care. POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM Copyright Cengage Learning. Powered by Cognero.

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21. Sales forecasts are typically expressed in dollars or units. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 22. Both short-term and long-term sales forecasts are needed for a well-constructed marketing plan. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 23. Forecasting is used less frequently by small firms than by large firms. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 24. Due to the high costs, new ventures seldom use established intermediaries to handle the distribution of their product. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 25. The term market means different things to different people. a. True b. False ANSWER: True RATIONALE: Another term for the chain-ratio method of sales forecasting is the breakdown process, not the buildup process. POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 26. Observation is probably the oldest form of research in existence. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 27. Marketing consists of those business activities that direct the a. creation, development, preparation, communication, and delivery of a bundle of satisfaction from the creator to the target market. b. plan for optimal production efficiency. c. identification of alternative technologies. d. establishment of a sales-oriented marketing philosophy. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:06 PM 28. Abigail purchased a container of salt. Which of the following statements is true? a. The core product is seasoning for her food and the actual product is the salt itself. b. The core product is the salt itself and the augmented product is seasoning for her food. c. The actual product is seasoning for her food and the core product is the salt itself. d. The augmented product is the salt itself and the core product is seasoning for her food. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 29. Andrew is considering two models of cars. The size, price, and options are identical. However, one model gets better gas mileage. This fact would be considered a(n) _____ product. a. core b. actual c. augmented d. ancillary ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 30. In the case of a pair of shoes, the core product is a. basic protection for the feet. b. the shoes themselves. c. greater comfort. d. increased running speed. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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31. A firm's marketing philosophy determines how its marketing activities are developed in the marketing plan and used to achieve a. efficiency. b. customer response. c. desirable thought patterns. d. business goals. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 32. Traditionally, marketing philosophies have been categorized as a. consumer-oriented and market-oriented. b. consumer-oriented, product-oriented, market-oriented, and volume-oriented. c. consumer-oriented, market-oriented, sales-oriented, and process-oriented. d. consumer-oriented, production-oriented, and sales-oriented. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 33. The _____ marketing philosophy is the most consistent with long-term success for a small business. a. production-oriented b. market-oriented c. sales-oriented d. consumer-oriented ANSWER: d POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 34. Koldpak has focused principally on the development of revolutionary new ways of containerizing fresh produce for grocery stores. The firm's marketing philosophy is a. consumer-oriented. b. market-oriented. c. production-oriented. d. sales-oriented. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 35. Creators Plus, a modest-size manufacturer of quality crafts, expends considerable resources to ensure that its products are created in the most efficient manner. According to the owner, distribution and promotion are secondary considerations to managing an expedient production process. Creators Plus subscribes to the _____ marketing philosophy. a. process-oriented b. market-oriented c. sales-oriented d. production-oriented ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUS PROG: Reflective Thinking Creation of Value Bloom’s: Analyze 8/29/2018 11:22 AM 1/1/2019 4:33 PM

36. The consumer-oriented marketing philosophy a. utilizes a "build-a-better mousetrap" approach. b. focuses on "pushing the product." c. recognizes first and foremost the need for attaining production efficiency goals. d. believes that everything, including production and sales, centers on the consumer and his or her needs. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 37. Every day, associates of Sewell Motors, a Dallas-based auto retailer, strive to exceed the company's expectations of treating the customer as its number-one priority. Every action, policy, and ultimate sale is conducted professionally, with consumers' needs in mind. Sewell Motors subscribes to the _____ marketing philosophy. a. consumer-oriented b. market-oriented c. sales-oriented d. production-oriented ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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38. The decision to produce flavored spring water ice cubes in response to requests from its customers reflects Norway Ice Company's _____ marketing philosophy. a. production-oriented b. sales-oriented c. consumer-oriented d. response-oriented ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 39. Adopting a consumer-oriented marketing philosophy is most consistent with a. quickly gaining highly profitable market returns. b. achieving long-term success in many areas, not just marketing. c. the revenue stabilizing effect of large market shares. d. focusing on the single most profitable consumer segment. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 40. A firm's marketing mix consists of _____ activities. a. pricing, promotion, and distribution b. product, pricing, and promotion c. product, promotion, and distribution d. product, pricing, promotion, and distribution ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 41. A _____ philosophy focuses on "pushing the product." a. production-oriented b. sales-oriented c. consumer-oriented d. efficiency-oriented ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 42. It is strongly recommended that all new businesses begin with a(n) _____ orientation. a. efficiency b. sales c. production d. consumer ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:22 AM 1/1/2019 4:33 PM

43. Which of the following is NOT part of the market analysis component of a marketing plan? a. A customer profile b. A SWOT analysis c. An actual sales forecast d. A detailed discussion of the major benefits to customers provided by the product and/or service ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 44. All of the following are major components of the marketing plan EXCEPT a. market segmentation. b. the competition. c. marketing strategy. d. market analysis. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 45. The market analysis section of the marketing plan should include a. sales options. b. a customer profile. c. a statement of marketing tendencies. Copyright Cengage Learning. Powered by Cognero.

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d. a summary of market philosophies. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 46. The description of potential customers in a target market is commonly called a a. customer profile. b. demographic detailing. c. Simpkins matrix. d. target picture. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 47. A SWOT analysis should tell an entrepreneur a. what actions he or she might take to avoid a threat. b. where the business stands relative to the competition. c. how competitors are likely to react when a new marketing tactic is tried. d. All of these are correct. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analytic DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/3/2019 5:07 AM 48. Irene, owner of a small retail shop, is evaluating her customer profile. Which of the following items is the most critical for her customer profile? a. The financial ratios to see how much her product costs the customer b. Whether the marketing research was completed with primary or secondary data c. The customer benefits to verify they are reasonable d. The customer demographics to determine new customers ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 49. The product/service section of the marketing plan should include all of the following EXCEPT a. the name of the business and why it was selected. b. any legal protections obtained for the name of the product or service. c. the entrepreneur's approach to creating customer awareness of the product or service. d. the name of the product or service and why it was selected. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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50. In preparing a sales forecast, it is desirable to include forecasts covering the "most likely," "best-case," and "_____" scenarios. a. rapidly shifting b. pessimistic c. predominant d. worst-case ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:06 PM 51. Allison is gathering information about competitors in her industry for inclusion in the _____ section of her marketing plan. a. market analysis b. marketing research c. SWOT analysis d. competition ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 52. The most detailed and closest scrutinized section of a formal marketing plan is the a. competitor analysis. b. marketing strategy. c. market analysis. d. consumer analysis. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 53. The name of a new business should a. be simple, memorable, and descriptive of the benefit provided by the product or service. b. be simple, memorable, and descriptive of the product or service. c. include the family name of the founder and be descriptive of the product or service. d. be simple and memorable, and include the name of the founder. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 54. The logic behind selecting the company _____ should be explained in the product/service section of a marketing plan. a. logo b. name c. slogan d. philosophy ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 55. John, a car repair shop owner, is developing the warranty and repair policies for his business. Which of the following sections of the marketing strategy is he addressing? a. Promotion section b. Product and/or service section c. Distribution section d. Pricing section ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 56. Brenda is creating the marketing plan for her bakery. Many of the recipes she will use were handed down through her family, and she would like to keep them secret. These recipes will be considered a. patent-protected. b. copyrighted. c. intellectual property. d. family heirlooms. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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57. Miguel is deciding how to get his product to his customers. His options include a fixed location, a mobile location, working out of his home, and the Internet. Miguel is preparing the _____ section of his marketing plan. a. product/service b. distribution c. price d. promotion ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 58. In her marketing plan, Candace is describing the laws of a foreign country and providing information about the exchange rate between currencies. It is likely Candace is considering _____ as a method of distribution. a. importing b. exporting c. Internet marketing d. air transport ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 59. At a minimum, the price of a product or service must cover a. the owner’s expected return on investment. b. the cost of bringing it to customers. c. all costs of the business plus the profit margin. d. production and distribution costs. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 60. The price of an item should be a. based exclusively on break-even analysis. b. less than what the competition is charging. c. based on what purchasers are willing to pay. d. total costs plus a margin of profit. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:08 PM 61. The risk of being the lower-cost producer of a product or service is a. your business will fail more quickly. b. your business will generate excess cash and will incur higher taxes. c. your business will have problems keeping up with demand. d. customers will abandon your business when the competition offers a lower price. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - Analytic United States - BUS PROG: Promotion TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 62. The _____ section of the marketing plan describes the entrepreneur's approach to creating customer awareness of the product or service and explains why customers will be motivated to buy a. product/service b. promotion c. distribution d. pricing ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 63. Why would a small business conduct less marketing research than a larger, established firm? a. The entrepreneur can rely on intuition and observations. b. Marketing research is expensive. c. Marketing research is not necessary for a start-up business. d. Data is not generally available for new business ideas. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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64. Which of the following statements about conducting marketing research is true? a. It is recommended that a small business conduct marketing research without the assistance of an expert, as the cost of hiring such help is often not worth it. b. An entrepreneur should be open to using all research techniques, including ones he or she is not familiar with. c. Before committing to research, an entrepreneur should always estimate the projected cost of marketing research and compare it with the benefits expected. d. All of these are correct. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 12/29/2018 7:48 AM DATE MODIFIED: 1/3/2019 5:08 AM 65. The first step in the marketing research process is to a. select a data collection method. b. identify consumer/business segments of interest. c. identify the informational need. d. conduct a preliminary information search. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 66. To determine credit card average purchases, managers of Component City Stereo and Appliances reviewed credit card sales receipts from the previous three months. Managers are conducting marketing research by collecting and analyzing _____ data. a. primary b. observational c. questioning Copyright Cengage Learning. Powered by Cognero.

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d. secondary ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Data Analysis KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 67. Which of the following is NOT a drawback of using secondary data? a. The units of measure may not fit the current problem. b. It can be much more expensive than gathering primary data. c. Information may be outdated. d. The sources may suffer from a lack of credibility. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 68. Which of the following sources of data would be the least helpful for secondary data use? a. Libraries of higher education institutions b. The Small Business Administration c. Blogs d. Software programs ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 69. Techniques used in accumulating primary data are often classified as _____ and _____ methods. a. internal; external b. observational; questioning c. exploratory; descriptive d. focus; comprehensive ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Data Analysis KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 70. Mary, owner of Delany Salsas, is curious to know whether the new packaging for her line of salsas is being noticed by supermarket consumers. To collect information, she passively watches shopper reactions as they pass by the Delany Salsas display. Mary is collecting _____ data through _____ methods. a. secondary; observational b. primary; questioning c. primary; observational d. secondary; questioning ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Data Analysis KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/1/2019 4:33 PM

71. A simple but effective form of observational research is a. focus groups. b. questionnaires. c. mystery shopping. d. statistical analysis. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 72. _____ and _____ are questioning methods that involve contact with respondents. a. Questionnaires; telemarketing b. Observations; surveys c. Mystery shopping; surveys d. Surveys; focus groups ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:08 PM 73. A(n) _____ is the basic instrument used to guide the researcher who administers a survey and the respondent who takes it. a. questionnaire b. questioning form c. interview outline d. guide form Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 74. Marta's job involves asking shoppers in the mall about their experience with specific products. She works from a list given to her by the products' producers. Marta is using the _____ method to gather _____ data. a. observational; secondary b. questioning; primary c. observational; primary d. questioning; secondary ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Data Analysis KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 75. Which of the following is a disadvantage of mail surveys? a. They are very expensive to conduct. b. They usually yield low response rates. c. They are inefficient when target respondents are widely dispersed. d. They often suffer from poor design. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:09 PM 76. When designing and testing a questionnaire, an entrepreneur should a. pretest a questionnaire by administering it to a small sample of respondents who are representative of the group to be surveyed. b. ask the more sensitive questions near the beginning of the questionnaire. c. ask questions that relate both directly and indirectly to the issue under consideration. d. ask more multiple-choice questions than open ended-questions, as respondents are more likely to answer multiple-choice questions. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Data Analysis KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 77. To prepare the market analysis section of a marketing plan, an entrepreneur needs a proper understanding of the term a. strategy. b. product. c. consumer. d. market. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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78. A _____ is defined as a group of customers or potential customers who have purchasing power and unsatisfied needs. a. consumer segment b. target market c. market d. consumer market ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 79. In order to be appropriately considered a market, a group of customers or potential customers must have a. purchasing power. b. market power. c. satisfied needs. d. correlated needs. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 80. Odessa is writing the marketing plan for her bed and breakfast. She has written that her market includes everyone from infants to the elderly. This is incorrect because a. customers in a market must have purchasing power. b. the elderly are not likely to have unsatisfied needs. c. infants cannot write. d. infants do not make buying decisions. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 81. Oliver figured if people were willing to pay for bottled water, they would also be willing to pay for bottled air. Oliver has forgotten that customers will not buy unless they have _____ needs. a. correlated b. inversely related c. unsatisfied d. unrecognized ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 82. Paul is a certified public accountant (CPA). He offers a variety of services depending on the needs of his customers. Some hire him to perform bookkeeping activities; others have him prepare their tax return. Paul's market is segmented based on a. benefit variables. b. demographic variables. c. income levels. d. basic needs. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 83. Rhoda describes her typical customer as female between the ages of 22 and 35 with at least two years of college education and a household income above $50,000 annually. Rhoda is using _____ variables to describe her customers. a. numeric b. benefit c. demographic d. psychographic ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 84. Morton sells salt; Domino sells sugar. The best strategy for either of these products would be a(n) _____ strategy. a. unsegmented b. multisegment c. differentiated d. single-segment ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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85. Meredith is opening a clothing store that sells both men's and women's clothing. Which of the following approaches is probably the wisest strategy for the marketing efforts of this company? a. Unsegmented strategy b. Multisegment strategy c. Single-segment strategy d. Bisegment strategy ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 86. The _____ strategy is probably the wisest strategy for small businesses to use during initial marketing efforts. a. unsegmented b. multisegment c. single-segment d. bisegment ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 87. People of all backgrounds, occupations, and income levels wear watches, but Rolex focuses only on the high-income portion of the market. Rolex uses a(n) _____ strategy. a. mass marketing b. multisegment c. unsegmented d. single-segment Copyright Cengage Learning. Powered by Cognero.

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ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 88. A _____ is an estimation of how much of a product or service can be sold within a given market during a defined time period. a. market forecast b. market analysis c. sales forecast d. sales analysis ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 89. Richard is trying to figure out how many units of his product his new business could reasonably expect to sell in its first year. Richard is working on the a. production schedule. b. marketing research. c. inventory policy. d. sales forecast. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 90. Entrepreneurs should base their market assessments, production schedules, inventory policies, and personnel decisions on a. observational techniques. b. qualitative analysis. c. intuition alone. d. the sales forecast. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 91. A sales forecast is an essential component of the marketing plan because it a. is critical in assessing the feasibility of a new venture. b. determines the marketing philosophy used by the firm. c. is used to locate potential customers. d. determines the type of marketing strategy based on segmentation considerations. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Copyright Cengage Learning. Powered by Cognero.

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92. Because he lacks strong forecasting skills, Stan should a. become a member of his trade association. b. subscribe to professional forecasting services. c. read magazines focused on small business ownership. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 93. Shiloh is attempting to keep in touch with industry trends. Her best option is a. through contacts with appropriate trade associations. b. frequent meetings with her accountant. c. through in-person interviews. d. to prepare a sales forecast. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 94. Theodore has stores in multiple states. This is an example of _____ segments. a. demographic b. geographic c. behavioral d. bottom-up ANSWER: b POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 95. If a small business will be using the services of an advertising agency, all of the following should be mentioned in the promotion section of the marketing plan EXCEPT a. the name of the agency. b. the credentials of the agency. c. how the agency's employees are compensated. d. a brief mention of successful campaigns supervised by the agency. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 96. To calculate customer acquisition costs, divide the _____ costs of the business by the actual or projected number of customers. a. short-run b. total fixed c. total variable d. marketing ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Strategy Bloom’s: Remember 8/29/2018 11:22 AM 1/1/2019 4:33 PM

97. Two broad sets of segmentation variables that represent the major dimensions of a market are _____ and _____ variables. a. benefit; demographic b. psychological; physiological c. social; economic d. business; consumer ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 98. A sales forecast is the typical indicator of a. market adequacy. b. market potential. c. unmet needs. d. opportunities and threats. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 99. An unsegmented strategy assumes that Copyright Cengage Learning. Powered by Cognero.

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a. individual market segments have different preferences. b. customers in a market lack purchasing power. c. all customers desire the same benefit from the product or service. d. customers will buy regardless of whether they are motivated to do so. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 100. Identify the three levels of a product or service as a bundle of satisfaction. Using this information, provide an example for the U.S. Postal Service. ANSWER: The product or service as a bundle of satisfaction has three levels: (1) core product/service, (2) actual product/service, and (3) augmented product/service. 1. Using the U.S. Postal Service, an example of the three levels would be as follows. The core product/service (the fundamental benefit or solution sought by customers) is the delivery of information. 2. The actual product/service (the basic physical product and/or service that delivers those benefits) is the actual placing of that information into a mailbox. 3. The augmented product/service (the basic product and/or service plus any extra or unsolicited benefits to the consumer) is the convenience of that information being at a person’s home mailbox or at a mailbox close to them. POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand | Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 101. Compare and contrast the three marketing philosophies. Give supporting evidence on why one method is stronger than the others. Copyright Cengage Learning. Powered by Cognero.

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ANSWER:

Three different marketing perspectives guide most small businesses: production-oriented, sales-oriented, and consumer-oriented philosophies. The first two philosophies are used most often, as they are associated with the experience and aptitudes of entrepreneurs who may have a manufacturing or technology-based background, or who may have had a career in sales. A production-oriented philosophy emphasizes the product as the single most important part of the business. The firm concentrates resources on developing the product in the most efficient manner, while promotion, distribution, and other marketing activities are given less attention. A sales-oriented philosophy deemphasizes production efficiencies and customer preferences in favor of a focus on "pushing the product." Achieving sales goals becomes the firm's highest priority. A firm adopting a consumer-oriented philosophy believes that everything, including production and sales, centers on the consumer and his or her needs. The result: All marketing efforts begin and end with the consumer.

Both production- and sales-oriented philosophies generate short-term success. However, a consumer orientation not only recognizes production efficiency goals and professional selling but also adds concern for customer satisfaction. Thus, a small business should adopt a consumer orientation to marketing, as that philosophy is most consistent with long-term success. POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-1 What Is Small Business Marketing? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 102. What are the "4 Ps" of marketing strategy that should be discussed in a marketing plan? ANSWER: The "4 Ps" of marketing strategy that should be discussed in the marketing plan are (1) product decisions affecting the total product and/or service, (2) place (distribution) activities, (3) pricing decisions, and (4) promotional activities. POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-2 The Formal Marketing Plan QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.02 - LO: 7-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Understand 8/29/2018 11:22 AM 1/1/2019 4:33 PM

103. What are the problems with secondary data use? How can a new entrepreneur neutralize these problems? ANSWER: The use of secondary data has several drawbacks. One is that the information may be outdated. Another is that the units of measure used in the secondary data may not fit the current problem. Finally, the question of credibility is always present. Some sources of secondary data are less trustworthy than others. It is advisable to compare several different secondary sources to see whether they are reporting similar data. Professional research specialists can also help assess the credibility of secondary sources. POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 104. What techniques are used in collecting primary data? Give examples to support the answer. ANSWER: Observational methods and questioning methods are two techniques used in accumulating primary data. • •

Observational methods avoid interpersonal contact between respondents and the researcher. Examples include counting customers in a store or acting as a mystery shopper. Questioning methods involve some type of interaction between respondents and the researcher. Examples include surveys (mail, Internet, telephone), personal interviews, and focus groups.

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DATE MODIFIED:

1/1/2019 4:33 PM

105. What are some of the guidelines that should be followed when designing and testing a questionnaire? ANSWER: Here are several considerations to keep in mind when designing and testing a

questionnaire: • • • • • •

Ask questions that relate to the issue under consideration. Select the form of question, such as open-ended or multiple-choice, that is most appropriate for the subject and the conditions of the survey. Carefully consider the order of the questions. Asking questions in the wrong sequence can produce biased answers to later questions. Ask the more sensitive questions near the end of the questionnaire. Carefully select the words in each question. They should be as simple, clear, and objective as possible. Pretest the questionnaire by administering it to a small representative sample of respondents who are representative of the group to be surveyed.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-3 Marketing Research for the Small Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.03 - LO: 7-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 106. Define the term market, and explain the key ingredients of that definition. ANSWER: The term market means different things to different people. However, the textbook defines this term as "a group of customers or potential customers who have purchasing power and unsatisfied needs." The specifics of this definition include three key ingredients: 1. The market must have buying units, or customers. These units may be individuals or business entities. 2. Customers in a market must have purchasing power. Those who lack money and/or credit do not constitute a viable market because no transactions can occur. 3. A market must contain buying units with unsatisfied needs. Customers, for instance, will not buy unless they are motivated to do so—and motivation can occur only when a customer recognizes his or her unsatisfied needs.

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE: HAS VARIABLES:

1 Hard 7-4 Understanding Potential Target Markets Essay False

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STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand | Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:15 PM 107. Holley is starting a new business and is trying to forecast sales. She has owned two other businesses, one of which was in the same industry as this new venture. Discuss the implications for forecasting for the new business. What could she do to increase her forecasting success? ANSWER: Conditions that will make forecasting easier include her past experience. She should be familiar with forecasting techniques because she has owned a business in the same industry before this proposed operation. However, forecasting could also be more difficult because the operation is new. Joining the trade association of her industry might provide her current information. Also, reading trade publications and magazines focused on small business ownership, as well as subscribing to a professional forecasting service, would help her obtain forecasts of general business conditions or specific forecasts for given industries. POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-5 Estimating Market Potential QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/2/2019 4:15 PM 108. Briefly discuss the three types of market segmentation strategies. Provide examples of businesses that use each of the strategies. ANSWER: Three types of market segmentation strategies are: 1. The Unsegmented Strategy. When a business defines the total market as its target, it is following an unsegmented strategy (also known as mass marketing). This strategy assumes that all customers desire the same basic benefit from the product or service. With an unsegmented strategy, a firm develops a single marketing mix—one combination of product, price, promotion, and place. Its competitive advantage must be derived from either a cost- or a differentiation-based advantage. 2. The Multisegment Strategy. If a firm determines that two or more market segments have the potential to be profitable and then develops a unique marketing mix for each segment, it is following a multisegment strategy. For example, clothing stores may market to both men and women (demographic segments). A group of banks may offer services in multiple states (geographic segments). A company that owns several restaurant chains may have discovered that some customers choose a restaurant based on price while others are loyal to a brand (behavioral segments). 3. The Single-Segment Strategy. When a firm recognizes that several distinct market segments exist but chooses to concentrate on reaching only the most potentially Copyright Cengage Learning. Powered by Cognero.

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profitable segment, it is following a single-segment strategy. A competitive advantage is achieved through a cost- or differentiation-based strategy. Students' examples will vary. POINTS: 1 DIFFICULTY: Hard REFERENCES: 7-4 Understanding Potential Target Markets QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Apply | Bloom’s: Understand DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM Match the term with its definition. a. actual product/service b. augmented product/service c. core product/service d. customer profile e. demographic variables f. marketing g. primary data h. sales forecast i. secondary data j. segmentation variables DIFFICULTY: Easy REFERENCES: 7-1 What Is Small Business Marketing? 7-2 The Formal Marketing Plan 7-3 Marketing Research for the Small Business 7-4 Understanding Potential Target Markets 7-5 Estimating Market Potential QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 SMAL.LONG.20.07.02 - LO: 7-2 SMAL.LONG.20.07.03 - LO: 7-3 SMAL.LONG.20.07.04 - LO: 7-4 SMAL.LONG.20.07.05 - LO: 7-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

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109. The basic physical product and/or service that delivers customer benefits ANSWER: a POINTS: 1 110. The fundamental benefit or solution sought by customers ANSWER: c POINTS: 1 111. The parameters used to distinguish one form of market behavior from another ANSWER: j POINTS: 1 112. Market information that has already been compiled ANSWER: i POINTS: 1 113. New market information that is gathered by the firm conducting the research ANSWER: g POINTS: 1 114. The basic product and/or service plus any extra or unsolicited benefits to the consumer that may prompt a purchase ANSWER: b POINTS: 1 115. A description of potential customers in a target market ANSWER: d POINTS: 1 116. A prediction of how much of a product or service can be sold within a given market during a specified time period ANSWER: h POINTS: 1 117. Specific characteristics that describe customers, their purchasing power, their consumption patterns, and other factors ANSWER: e POINTS: 1 Match the term with its definition. a. benefit variables b. customer acquisition costs c. market d. market analysis e. market segmentation f. marketing mix g. marketing research h. multisegment strategy i. single-segment strategy Copyright Cengage Learning. Powered by Cognero.

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j. unsegmented strategy (mass marketing) DIFFICULTY: Moderate REFERENCES: 7-1 What Is Small Business Marketing? 7-2 The Formal Marketing Plan 7-3 Marketing Research for the Small Business 7-4 Understanding Potential Target Markets QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.07.01 - LO: 7-1 SMAL.LONG.20.07.02 - LO: 7-2 SMAL.LONG.20.07.03 - LO: 7-3 SMAL.LONG.20.07.04 - LO: 7-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:22 AM DATE MODIFIED: 1/1/2019 4:33 PM 118. The amount spent to attract each new customer who makes a purchase from the company ANSWER: b POINTS: 1 119. The process of locating and describing potential customers ANSWER: d POINTS: 1 120. The division of a market into several smaller groups, each with similar needs ANSWER: e POINTS: 1 121. The gathering, processing, interpreting, and reporting of market information ANSWER: g POINTS: 1 122. A strategy that recognizes different preferences of individual market segments and develops a unique marketing mix ANSWER: h POINTS: 1 123. Specific characteristics that distinguish market segments according to the benefits sought by customers ANSWER: a POINTS: 1 124. A group of customers or potential customers who have purchasing power and unsatisfied needs ANSWER: c POINTS: 1 125. The combination of product and/or service, pricing, promotion, and distribution (place) activities ANSWER: h Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 126. A strategy that defines the total market as the target market ANSWER: j POINTS: 1

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Chapter 08 - The Organizational Plan: Teams, Legal Structures, Alliances, and Directors 1. A highly competent management team can rescue a firm that is based on a weak business concept or that lacks adequate resources. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 2. A management team is often stronger than an individual entrepreneur because it provides a diversity of skills and greater assurance of continuity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 3. The concept of balance on the management team means that the entrepreneur should not be wrapped up too much in one area, such as sales or production, but be well rounded. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 4. The management team of a small business should focus on competent insiders as opposed to outside specialists. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 5. The sole proprietorship is a business owned by two or more people but operated by only one person. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 6. There are no limits on the owner's personal liability in a sole proprietorship. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 7. Sole proprietors often benefit from fringe benefits such as tax-free insurance plans. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 8. Creating a partnership allows a business to pool the managerial talents and capital of those individuals joining together as partners. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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9. Partners must contribute capital or assets to form a partnership. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 10. Partners always share profits and losses equally. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 11. A partnership agreement states explicitly the rights and duties of partners with each party assuming joint and several liability. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 12. An ownership interest does not confer a legal right to act for the firm or to share in its management. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 13. Incorporation will not protect a firm’s owners from liability if it is used to perpetrate a fraud, skirt a law, or commit some other wrongful act. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 14. The liability of owners is greater with a sole proprietorship than with a general partnership. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 15. A partnership reports the income it earns to the Internal Revenue Service, but the partnership itself does not pay any taxes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 16. A limited partnership must have at least two general partners and one or more limited partners. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities Copyright Cengage Learning. Powered by Cognero.

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17. S corporations can have nondomestic alien stockholders but no more than 50 stockholders. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 18. The LLC differs from the C corporation in that the LLC avoids financial complications from double taxation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 19. A professional corporation shields owners from one another's liability and is set up for individuals in certain professional practices. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 20. A nonprofit corporation must establish a board of directors or trustees to oversee its operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 21. In a B corporation, shareholders can sue directors if the company falls short of its stated social mission. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:15 PM 22. For the best success, strategic alliance partners should structure contracts to ensure growth, including an “easy out” clause if the alliance does not go well. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 23. Typically strategic alliances are harder to set up than to maintain. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 24. The board of directors is elected by the stockholders of a corporation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities Copyright Cengage Learning. Powered by Cognero.

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25. Sometimes, small business board members are given company stock in lieu of compensation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 26. An advisory board functions like a board of directors does, except that the members are compensated for their services and the company must have directors and officers liability insurance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 27. By utilizing the experience of a board of directors, the chief executive of a small corporation may have to relinquish active control of its operations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 28. Webster is reviewing résumés looking for candidates for leadership positions in his very young company. Webster is putting together his: a. business plan. b. advisory board. c. board of directors. d. management team. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Group Dynamics KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:17 PM 29. After working together for a few months, disputes begin to arise between two of the young company’s leaders. Their differences seem to be irreconcilable. The owner’s best action is to a. let one or both of the individuals go. b. call in an arbitrator. c. sell the business. d. form a strategic alliance with a larger company. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

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30. Vicenzo is the sole owner and manager of a startup company. As the business grows, he finds it more difficult to fulfill the needs of all the management positions. Although he is the creative genius behind the company, he lacks experience in other areas. At this point, Vicenzo should a. seek the advice of an investment banker. b. hire a management team with expertise in complementary areas. c. encourage his advisors to take an active role in managing the company. d. form an alliance with another startup company. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 31. Ricardo has a new startup and has hired his brother and nephew as part of the management team. Which of the following is one of the possible disadvantages of this arrangement? a. Federal wage and hour laws do not apply to family members. b. They are willing to make personal sacrifices for the venture. c. The team could lack complementary strengths. d. They share liability in the event of a business failure. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM Copyright Cengage Learning. Powered by Cognero.

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32. The key to strong management in a new firm is a. balance, with each member having competence in at least one area. b. financial competence of the chief executive. c. a strong marketing manager who understands financial statements. d. close friendship among all members of the team. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 33. Startup owners may increase their chances for success by seeking _____ over a management team with family and friends. a. a good CPA b. an outstanding law firm c. members with a balance of expertise d. a business consultant team ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 34. As it relates to new businesses, one function of a social network is to a. promote the enterprise during conversations with potential rivals. b. provide a pool of candidates for leadership positions. c. assure a steady flow of applicants for production positions. d. connect the enterprise to a web of contacts that provides access to a wide range of resources. ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 35. An entrepreneur can best build social capital by a. joining several social networking sites. b. building contacts through community organizations. c. letting others know when the company has done something well. d. using reciprocation. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 36. Reciprocation is a. responding to competitor’s marketing efforts. b. a powerful sense of obligation to repay what has been done for you. c. not important when building social capital. d. only important once you have established your business. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Remember 8/29/2018 11:23 AM 12/27/2018 5:04 PM

37. Robbie’s financial advisor referred a customer to Robbie’s new business. Under the concept of _____, Robbie is now obligated to return the favor. a. reciprocation b. social capital c. social networking d. unlimited liability ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 38. The number of small business owners who are choosing to go it alone is increasing significantly because this option has been made increasingly manageable by a. new tax incentives. b. emerging technologies. c. expanding social networks. d. balanced management teams. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:18 PM 39. Unlimited liability for business debts is imposed on a. shareholders in a C corporation. Copyright Cengage Learning. Powered by Cognero.

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b. shareholders in an S corporation. c. sole proprietors. d. limited partners. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 40. Max chose to operate his production studio as a sole proprietorship even though his attorney cautioned that he was a. reducing its overall profit potential. b. increasing his taxable income. c. exposing himself to unlimited personal liability. d. violating an existing partnership agreement. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 41. Trevor is in his early 60s but still wants to “strike out on his own” by starting a new business. One roadblock he may face is resistance from a. creditors to lend money for the enterprise. b. his heirs about the distribution of assets at his death. c. customers who fear he may become ill and unable to fulfill their orders. d. the federal government regarding his tax identification number. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 42. Which of the following legal forms has the smallest percentage of new businesses? a. Sole proprietorship b. Partnership c. C corporation d. S corporation ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom's Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 43. Millie has a sole proprietorship that is her only source of income. Which of the following legal actions should she take to prevent the business from being ruined if she becomes incapacitated? a. Give someone who is competent power of attorney to continue the business. b. State in her will what she would like done with the company. c. Find a partner and change the legal organization of the company. d. Tell her heirs to sell as she can’t prevent ruin with a sole proprietorship. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom's Analyze Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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44. Which of the following best defines a partnership? a. A business owned and operated by one person who hires part-time employees b. A voluntary association of two or more persons to operate a business for profit c. The governing body for a corporation d. A group of three persons in which each person has limited personal liability ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom's Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 45. Any person capable of _____ may legally become a business partner. a. assenting to liability b. contracting c. contributing capital d. having a claim on assets ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 46. A key characteristic of a partnership is that each partner a. must contribute capital to the business. b. shares in company assets upon the dissolution of the partnership. c. is capable of legally contracting. d. must manage the business. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 47. Which of the following legal forms allows owners to contribute no capital but still play a part in managing the business and share in its profits? a. S corporation b. C corporation c. Partnership d. Sole proprietorship ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 48. Upton was surprised to find his partner had signed an agreement to sell product to a customer at below cost. He tried to cancel the contract but found out that a. partners have legal power of attorney to do as they please. b. each partner is in essence a sole proprietor. c. partners are seldom trustworthy. d. any partner can legally bind the company without the consent of any other partner. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 49. As she considered becoming a partner in a new business venture, Valerie asked her potential partner about a(n) _____ in the event that the partnership did not work out as expected. a. liquidation plan b. equity split c. exit strategy d. asset distribution plan ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:19 PM 50. The legal document that spells out the partners’ rights and duties is called the a. articles of incorporation. b. partnership agreement. c. partnership bylaws. d. SS-4 form. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM Copyright Cengage Learning. Powered by Cognero.

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51. Zeno, Zella, and Zorro wish to form a partnership. Zeno is putting up 60 percent of the capital, Zella is putting up 40 percent, and Zorro is putting in no capital but will manage the business. In the absence of a provision in the partnership agreement, how will the liability and profits be distributed? a. According to the input of capital b. According to the amount of work each does in the business c. Equally d. According to the laws of the state where the partnership is formed ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 52. If partners cannot resolve disputes between themselves, they may be wise to hire a(n) a. business mediator. b. arbitrator. c. business judge. d. business attorney. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:47 PM 53. Abby, Adam, and Arnold are partners. They have planned to continue the partnership even after the death of any one partner. To this end, the partners have a. stipulated in their wills that their share of the partnership is bequeathed to the other two partners. b. purchased life insurance policies naming the other two partners as beneficiaries. c. created trust funds that can be used to pay off the heirs of the deceased partner. Copyright Cengage Learning. Powered by Cognero.

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d. secretly signed documents to be opened only after the death of the deceased partner that relinquish all claims to the partnership. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 54. A corporation a. is chartered under state laws. b. is chartered under federal laws. c. remains in existence only as long as its owners are alive. d. shifts liability of its debts to its owners. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 55. Which of the following entities is liable for a corporation's debts? a. Stockholders b. Board of directors c. The corporation itself d. The corporation's president ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 56. For a corporate charter to be obtained, a. one or more persons must apply to the secretary of state for permission to incorporate. b. the owner(s) must agree to be interviewed by a state department official. c. the owner(s) must negotiate an incorporation fee. d. the partners involved must outline a division of assets. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 57. Becky wants to organize her startup as a regular corporation. One of the first steps Becky should take is to a. hire the officers (president, treasurer, etc.) of her company. b. file her corporate charter with the secretary of state. c. apply for permission to incorporate in her state. d. obtain financing for her venture. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM Copyright Cengage Learning. Powered by Cognero.

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58. A corporate charter should be a. very detailed. b. prepared by the founder. c. broad in its statement of the firm's power. d. lengthy and precise. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 59. A corporate charter should a. be detailed. b. be in accordance with state law. c. include bylaws. d. indicate profit potential. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 60. Cameron is creating the document that specifies the size of the board, the duties of the directors, voting rights, etc. This document is known as the a. corporate bylaws. b. partnership agreement. c. employment contract. d. stock certificate. ANSWER: a POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 61. Which of the following is the preferred form of organization with regards to transferability of ownership? a. Sole proprietorship b. General partnership c. C corporation d. It depends on the circumstances. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 5:09 AM 62. A basic legal principle involving stockholders is that a. an ownership interest in a corporation does not confer a legal right to manage the firm. b. the board of directors cannot elect the principal owner as president. c. all dividends are nontaxable. d. stockholders cannot buy new stock until it is offered for public sale. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

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63. A typical common stockholder of a corporation a. has the right to act for the firm. b. has the right to receive declared dividends. c. can always buy new stock in proportion to stock already owned. d. can fire employees of the corporation. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 64. The right to buy new shares of stock in proportion to stock already owned is called a a. stock right. b. stock option. c. Section 1244 right. d. preemptive right. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 65. Stockholders have limited liability unless they a. are active in the management of the corporation. b. assume personal liability for debt. c. own preferred stock. Copyright Cengage Learning. Powered by Cognero.

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d. convert their shares to partnership status. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 66. Upon the death of the majority stockholder in a corporation, direct control may pass to a. an heir's dependents. b. an executor. c. the founder of the firm. d. employees as directed by an employee stock ownership plan. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 67. Ownership in a corporation a. is difficult to transfer. b. is more easily transferable than ownership in other forms of organization. c. is transferred in much the same way as stock in a partnership. d. noticeably affects the operation of the business. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 68. Which of the following organizational types results in the business owner having unlimited liability? a. Sole proprietorship b. LLC c. Limited partnership d. Corporation ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-2 Common Legal Forms of Organization 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:24 PM 69. To maintain status as a corporation, the corporation must a. reapply for a charter annually. b. submit its bylaws to the secretary of the state of incorporation every year. c. hold annual meetings of both the shareholders and the board of directors. d. properly declare annual dividends. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM Copyright Cengage Learning. Powered by Cognero.

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70. Because the corporation is a legal entity, one of its responsibilities is to a. have its accounting records audited. b. sell stock. c. pay dividends. d. file annual tax returns. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 71. Emile has very little money with which to start his business so he wants to keep the cost of forming his company as low as possible. Which of the following forms of ownership would you recommend for Emile? a. Sole proprietorship b. Partnership c. C corporation d. S corporation ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 72. Frank would like to avoid personal financial loss if his business idea does not work. Which of the following forms of ownership would you suggest? a. Sole proprietorship b. Partnership c. Professional corporation Copyright Cengage Learning. Powered by Cognero.

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d. Corporation ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 73. Ralph formed a corporation as a fund manager. He accepted money from his customers, promising to invest it and build cash value for them. Instead, he kept the money for himself to enjoy a lavish lifestyle. The court removed liability protection from his corporate entity because the incorporation had been used to perpetuate fraud. This is an example of a. piercing the corporate veil. b. unlimited liability. c. reciprocation. d. a preemptive right. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 74. Glenda, an employee of a corporation, caused a traffic accident while on company business. Which of the following will pay for the damages? a. The stockholders b. The board of directors c. The founder d. The corporation ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-3 Considerations in Choosing an Organizational Form Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 75. The two dimensions of management control of a small corporation usually involve which of the following individuals? a. Stockholders owning the majority of the voting common stock b. Corporate officers in conducting daily operations c. Both stockholders and corporate officers d. Neither the stockholders nor the corporate officers ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 76. Jane and Randy have a partnership with their company, JR Enterprises. Which of the following statements reflects how the partnership pays taxes? a. JR Enterprises does not pay any taxes. b. JR Enterprises pays taxes only as a partnership. c. Jane and Randy each pay taxes on the total income. d. Jane and Randy do not pay taxes since they are married. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities Copyright Cengage Learning. Powered by Cognero.

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77. In a limited partnership, which of the following types of partner remains bound by all debts of the business? a. Limited partner b. Special partner c. Partner with the greatest capital investment d. General partner ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 78. Lauren, a partner in Jales & Jales Bonding Company, manages its day-to-day operations. She is considered to be a _____ partner. a. directing b. general c. limited d. operating ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 79. Harvey would like to support his friend’s new business financially but also wants to protect his assets in case the business fails. Which form of ownership would you recommend? a. Sole proprietorship Copyright Cengage Learning. Powered by Cognero.

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b. Partnership c. Limited partnership d. 501(c)(3) corporation ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 80. One benefit of an S corporation is that it allows shareholders to receive dividends without a. paying taxes. b. penalties and interest. c. double taxation. d. partnership taxation. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 81. To be eligible to be an S corporation, a firm must a. have more than 75 stockholders. b. be domestic. c. have two or more classes of stock outstanding. d. be international in scope. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 82. Jeanne, a Canadian citizen, would like to invest in Ingrid’s startup. If Ingrid organizes her business as a(n) _____, Jeanne is prohibited from investing. a. sole proprietorship b. partnership c. S corporation d. limited liability company ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 83. Which of the following organizational forms would be best if the new company owners intend to provide extensive fringe benefits for owners or employees that would not be treated as taxable income to employees? a. Sole proprietorship b. Partnership c. C corporation d. Limited liability company ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities Copyright Cengage Learning. Powered by Cognero.

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84. The limited liability company form of organization a. avoids the double taxation of C corporations. b. affords less protection from liability than partnerships. c. is a poor choice for new businesses. d. can offer stock incentives to employees. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 85. Ingrid has asked 110 of her closest friends to invest in her company, promising them protection from personal liability. Which of the following forms of ownership would you recommend that Ingrid use? a. Professional corporation b. Nonprofit corporation c. S corporation d. Limited liability company ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 86. Collin’s Classic for Children with Cancer is a 501(c)(3) nonprofit corporation that sells shirts. The organization will be taxed as a(n) a. partnership. Copyright Cengage Learning. Powered by Cognero.

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b. C corporation. c. S corporation. d. None of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 5:10 AM 87. An owner in a professional corporation is shielded from a. their own liability. b. the liability of other owners. c. both their own liability and the liability of others. d. None of these are correct. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 88. Larry Knave, MD, is an owner in a professional corporation. If Dr. Knave is sued for malpractice, which of the following is the liability of the rest of the owners? a. They are protected from liability for his actions. b. They are responsible for his actions. c. The professional corporation is liable for his actions. d. No one is responsible for Dr. Knave’s actions. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 89. Fiction County Sheltered Workshop (FCSW) is a 501(c)(3) corporation. Day Services, a C corporation operating in the same county, has offered to buy FCSW. If this transaction occurs, which of the following happens to the money Day Services will pay for FCSW? a. The money will go to another nonprofit corporation. b. The money will be distributed to the founders of FCSW. c. The money will be distributed to the clients of FCSW. d. The money will go to the federal government. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 90. Which of the following forms of corporate structure is used by a company that equally concerns itself with making money and doing good in the world? a. Limited partnership b. B corporation c. Nonprofit corporation d. S corporation ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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Legal Responsibilities Bloom’s: Analyze 8/29/2018 11:23 AM 12/27/2018 5:04 PM

91. A strategic alliance is a(n) a. organizational relationship that links two or more separate businesses. b. unimportant organizational form in today's business environment. c. attempt to duplicate efforts between two firms. d. strategy that, as a result of its unwieldy nature, is falling from practice. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:25 PM 92. Hannah makes delicious baked goods but has no retail space. She has contracted with a local grocer to sell her wares in the grocery store. This arrangement is known as a(n) a. professional company. b. joint venture. c. strategic alliance. d. partnership. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 93. Large manufacturers have been known to form strategic alliances with small manufacturers in order to benefit from the smaller firms' Copyright Cengage Learning. Powered by Cognero.

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a. financial resources. b. operational expertise. c. research. d. product development efforts. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 94. A risk for a small firm creating a strategic alliance with a larger company is a. not being able to keep up with the fast speed of a large company. b. not having enough creative talent to join forces effectively. c. being squeezed financially. d. being too rigid for a large company’s standards. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 95. Jay’s Catering Company holds tasting events that work as a small business strategic alliance by promoting a. its combined technological expertise. b. the various cultures in the community. c. other complementary service providers. d. the flexibility of this small company. ANSWER: c POINTS: 1 DIFFICULTY: Hard Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 96. For a small firm, which of the following steps will increase the chance for success of a strategic alliance? a. Be protective of any proprietary materials shared with the other company. b. Discuss the proposed alliance in enough detail that limited adjustments are needed after beginning the alliance. c. Make sure the alliance is clearly a “win-win” opportunity. d. All of these steps will increase success. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 97. A corporation's board of directors a. is the governing body for corporate activity. b. directly manages the corporation. c. determines the taxability of dividends. d. usually designs the organizational structure of the firm. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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98. Lothian has asked five of his friends to serve on the board of directors of his new corporation. This is not a good idea for which of the following reasons? a. Friends are too dispassionate about the operations of the corporation. b. Friends are unlikely to disagree with the owner on matters brought before the board. c. Only stockholders can elect the board of directors so it is illegal for the owner to invite friends. d. Friends will find out too much about Lothian’s personal business. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 99. Linda has assembled a list of potential directors for her board. Whom should she not include? a. Her attorney b. An owner of a small noncompeting company c. Her college professor d. An executive at a large noncompeting company ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 100. The compensation paid to board members a. varies from no pay to $10,000 per meeting. b. may include a percentage of the profits. c. is typically the primary motivation for someone agreeing to be a member. Copyright Cengage Learning. Powered by Cognero.

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d. typically includes directors and officers liability insurance. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:27 PM 101. An advisory board, as compared to a board of directors, a. may be perceived as less of a threat to an owner than a board of directors. b. is always compensated, unlike persons serving on a board of directors. c. has increased legal liability, requiring the company to increase its insurance levels. d. has greater levels of decision making, requiring it to work more cooperatively. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 102. A significant difference between a board of directors and an advisory board is that the advisory board a. has unlimited liability for the actions of the corporation. b. is made up only of insiders. c. is required to meet quarterly, not annually. d. has no legal authority over the owner or the company. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 103. Discuss the concept of achieving balance in a management team. ANSWER: A management team consists of individuals with supervisory responsibilities, as well as nonsupervisory personnel who play key roles in the business. A management team often can bring greater strength to a venture than an individual entrepreneur can, because a team can provide a diversity of talent to meet various managerial needs. Not all members of a management team need competence in all areas—the key is balance. For example, if one member has expertise in finance, another should have an adequate marketing background. Diversity in perspectives and work styles enables the completion of complex tasks. A functionally diverse and balanced team will be more likely to cover all the business bases, giving the company a competitive edge. To ensure balance, a management team should comprise both competent insiders and outside specialists. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 104. Discuss the benefits of a social network to a small business owner. ANSWER: A social network is the web of relationships that a person has with other people, including friends from college, former employees and business associates, and contacts through community organizations like the Rotary Club and religious groups. The power of social networks is expanded tremendously as well-connected people are added to the management team. Management team members can connect the enterprise with a social network that provides access to a wide range of resources beyond the reach of individual team members. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-1 Building a Management Team QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Analyze 8/29/2018 11:23 AM 12/27/2018 5:04 PM

105. Identify the three most basic forms of legal organization used by small businesses. What are the factors one must consider when choosing a legal form of organization? ANSWER: The three most basic legal forms of organization used by small businesses are the sole proprietorship, partnership, and C corporation. The key factors in choosing an organizational form are the initial organizational requirements and costs, the liability of the owners, the continuity of the business, the transferability of ownership, management control, its attractiveness for raising capital, and income tax calculations. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-2 Common Legal Forms of Organization 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 106. What are the potential benefits and drawbacks of forming a partnership? ANSWER: Operating a business as a partnership has the following benefits: • • •

Sharing the workload, as well as the emotional and financial burdens of the enterprise. Gaining management talent that might otherwise break the budget. Adding companionship to life in a small business.

However, the personal conflicts in partnerships often offset the benefits, and partners often fall short of one another's expectations. Decision making is more complicated in partnerships because leadership is shared, and owners must also share their equity position in the business, which naturally dilutes the control of each partner. While some of the difficulties of partnerships are financial in nature, most are relational—for example, coping with a partner's dishonesty or dealing with differing priorities. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 107. Discuss the differences in the continuity of business for sole proprietorships, partnerships, and corporations. ANSWER: The death of an owner terminates the legal existence of a sole proprietorship. Thus, the possibility of the owner's death may cloud relationships between a business and its creditors and employees. It is important that the owner have a will, because the assets of the business minus its liabilities will belong to his or her heirs. In a will, a sole proprietor can give an executor legal authorization to run the business for the heirs until they can take it over or it can be sold. For a partnership, the company ends with the death, incapacity, or withdrawal of a partner. The company should be liquidated or reorganized. In the case of death, a partnership agreement should stipulate that the surviving partners can continue the business after buying the decedent’s interest. This option can be facilitated by having each partner carry life insurance that names the other partners as beneficiaries. When a partner withdraws unexpectedly, the remaining partners should take steps to avoid further losses: cut off the departing partner’s access to bank accounts, physical facilities, and company assets to avoid loss or damage to equipment critical to the business; quickly assess that partner's role in the enterprise, and take steps to fill his or her shoes to get the business back to normal as soon as possible; and sort out any legal issues that remain, such as abiding by any signed exit agreements. For a corporation, the death or withdrawal of a stockholder requires the stock shares to be transferred to a different individual. The corporation itself is a legal entity and continues after the death of the stockholder. However, the death of a majority stockholder can have unfortunate repercussions in a small firm. An heir, the executor, or a purchaser of the stock might well insist on direct control, with possible adverse effects for other stockholders. To prevent problems of this nature, legal arrangements should be made at the outset to provide for management continuity by surviving stockholders and fair treatment of a stockholder's heirs. As in the case of a partnership, taking out life insurance ahead of time can ensure the ability to buy out a deceased stockholder's interest. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 108. What are some suggestions you could offer someone for choosing a partner? ANSWER: The formation of a partnership involves consideration not only of legal issues but also of personal and managerial factors. A strong partnership requires partners who are honest, Copyright Cengage Learning. Powered by Cognero.

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healthy, capable, and compatible. The following suggestions may help entrepreneurs make the most of this form of organization: •

• •

•

Choose your partner carefully. Partnerships are like marriages—they work best when the right partner is chosen. Goals, values, and work habits should be compatible and skills should be complementary before committing to the deal. Above all, an entrepreneur should team up with a person he or she can trust, since the actions of his or her partner can legally bind the entrepreneur, even if a decision is made without the entrepreneur's knowledge or consent. Be open, but cautious, about partnerships with friends. Valued relationships can take a quick turn for the worse when a business deal gets rocky. Test-drive the relationship, if possible. More limited forms of business collaboration should be tried before jumping in with both feet. For example, the entrepreneur and his or her potential partner should cooperate on a small project or share a booth at a trade show. This will allow the entrepreneur to observe the behavior, style, and work habits of his or her prospective partner. This also allows the entrepreneur to assess his or her potential partner's strengths and weaknesses before committing to a longterm relationship. Create a shared vision for the business. Partners must be on the same page when it comes to forming the business concept they hope to develop together. This takes time, patience, and a lot of conversation. Other specific matters that should be discussed before joining forces include the expectations of all partners (contributions of time, money, expertise, etc.), planned division of work, anticipated vacation time, and the sharing of profits and losses. Prepare for the worst. More than half of partnerships fail. Most experts recommend having an exit strategy for the partnership from the beginning. What looks like a good business arrangement at the outset can quickly fall apart when market conditions shift, a partner becomes involved in another business venture, or personal circumstances change. If it becomes necessary, exiting a partnership is far more difficult when plans for such an unfortunate outcome were not considered early on.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-2 Common Legal Forms of Organization QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:29 PM 109. Julie and Diane are starting a new company decorating wedding cakes that are unique in their design and structure. Both women are certified chefs and have 10 years of experience between them. They are trying to decide whether to form a general partnership or a limited liability company (LLC)? Which form would you recommend? ANSWER: The recommended form would be an LLC, primarily based on the liability protection an LLC provides as opposed to the unlimited liability of a general partnership. Because the company could be sued if a person became sick from eating a decorated cake, the protection is critical.

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POINTS: DIFFICULTY: REFERENCES:

1 Hard 8-2 Common Legal Forms of Organization 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:31 PM 110. Explain how income is taxed in a sole proprietorship, a partnership, and a C corporation. ANSWER: The three major forms of organization are taxed in different ways: • •

•

Sole proprietorship. Self-employed individuals who operate a business as a sole proprietorship report income from the business on their individual federal income tax returns. They are then taxed on that income at the rates set by law for individuals. Partnership. A partnership reports the income it earns to the Internal Revenue Service, but the partnership itself does not pay any taxes. The income is allocated to the partners according to their agreement. The partners each report their own shares of the partnership's income on their personal tax returns and pay any taxes owed. C corporation. The C corporation, as a separate legal entity, reports its income and pays any taxes related to these profits. The owners (stockholders) of the corporation must report on their personal tax returns any amounts paid to them by the corporation in the form of dividends. (They must also report capital gains or losses, but only at the time they sell their stock in the company.) Dividends are, in essence, taxed twice—first as part of a corporation's earnings and then as part of the owners' personal income.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-3 Considerations in Choosing an Organizational Form QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 111. What is the principal advantage of an S corporation over a C corporation? ANSWER: An S corporation permits a business to retain the limited liability feature of a C corporation while offering more favorable tax treatment on income. A C corporation, as a separate legal Copyright Cengage Learning. Powered by Cognero.

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entity, reports its income and pays any taxes related to these profits. The owners (stockholders) of the corporation must report on their personal tax returns any amounts paid to them by the corporation in the form of dividends. Dividends are, in essence, taxed twice— first as part of a corporation's earnings and then as part of the owners' personal income. In contrast, an S corporation does not pay income taxes but instead passes taxable income or losses on to the stockholders. This allows stockholders to receive dividends from the corporation without double taxation on the firm's profit. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-3 Considerations in Choosing an Organizational Form 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.03 - LO: 8-3 SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:32 PM 112. In what situations would it be best for a company to be formed as a C corporation as opposed to a limited liability company? ANSWER: • The company wants to provide extensive fringe benefits to owners or employees. The C corporation can deduct these benefits, and they are not treated as taxable income to the employees. • The company wants to offer stock options to employees. Since limited liability companies do not have stock, they cannot offer such incentives. • The company hopes to go public or be sold at some time in the future. A C corporation can go public or be sold to another corporation in a tax-free, stock-forstock exchange. • The company plans to convert to a C corporation eventually. A company cannot change from a pass-through entity like a limited liability company without paying additional taxes. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM Copyright Cengage Learning. Powered by Cognero.

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113. What advantages does a small business have in forming a strategic alliance with another small business as opposed to a small business forming an alliance with a large company? ANSWER: According to Inc. researchers, strategic alliances between two small firms are often more flexible, dedicated, creative and understanding of the specific needs of small businesses. While alliances with large firms can give a tremendous boost to performance and offer a substantial boost to status and market access, the parties' strategic priorities may not mesh, and a major corporation can wield enormous power over a small, struggling enterprise. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 114. What steps could an entrepreneur take to improve his or her chances of success when forming a strategic alliance? ANSWER: When setting up an alliance, an entrepreneur can take the following steps to improve his or her chances for success: • • • • • •

Establish a healthy network of contacts to lead to other contacts. Identify and contact individuals within a firm who are likely to return calls. Be prepared by knowing the partner’s potential financial benefits from the alliance. Learn to speak and understand the “language” of the other company. Make sure that any alliance offer is clearly a win-win opportunity. Monitor the progress of the alliance to ensure that goals and expectations are being met and to make changes as they become necessary.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-5 Forming Strategic Alliances QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 115. Explain the advantages of having outsiders as board members. ANSWER: Because an outside board's income does not depend on the firm, they can look at issues more dispassionately than can insiders who are involved in daily decision making. Outside Copyright Cengage Learning. Powered by Cognero.

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directors, for example, are freer to evaluate and to question a firm's ethical standards. Some operating executives, without the scrutiny of outside directors, may rationalize unethical or illegal behavior as being in the best interest of the company. In a family business, an outside board can help mediate and resolve issues related to leadership succession, in addition to providing more general direction. As outsiders, they bring to the business a measure of detachment from potentially explosive emotional differences. An outside board may also advise an entrepreneur to make tough decisions that are required to move the business forward. The board, for instance, may keep bringing the conversation back to issues that are easy to avoid. Directors on an outside board may also have a broad network of influential business friends and associates that they can reach out to on behalf of the company. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 116. List the requirements that must be met in order for a corporation to obtain S corporation status. ANSWER: To obtain S corporation status, a corporation must meet certain requirements, including the following: • • • • •

The corporation must be domestic. The corporation can have no more than 100 stockholders. All stockholders must be individuals or certain qualifying estates and trusts. Only one class of stock can be outstanding. It must not be an ineligible corporation.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-4 Specialized Legal Forms of Organization QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.04 - LO: 8-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:33 PM 117. What services are board members expected to perform for the corporation? ANSWER: Directors can fill gaps in the expertise of a management team and monitor its Copyright Cengage Learning. Powered by Cognero.

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actions. Directors assist the chief executive by debating ideas, helping to determine strategies, and discussing the pros and cons of policy proposals. They also advise on external business conditions and on proper reaction to the business cycle, provide informal advice from time to time on specific problems that arise, and offer access to important personal contacts. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 118. Explain the difference between a board of directors and an advisory council. ANSWER: Many small companies use an advisory board as an alternative to a board of directors. This group functions in much the same way as a board of directors does, except its members are not personally liable for the company's actions. Its actions are only advisory in nature. In other words, it has no legal authority over the owner or the company. POINTS: 1 DIFFICULTY: Hard REFERENCES: 8-6 Making the Most of a Board of Directors QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM Match the term with its definition. a. advisory board b. B corporation c. C corporation d. corporate charter e. joint and several liability f. partnership g. professional corporation h. S corporation (Subchapter S corporation) i. unlimited liability Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: REFERENCES:

Easy 8-2 Common Legal Forms of Organization 8-4 Specialized Legal Forms of Organization 8-6 Making the Most of a Board of Directors QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.02 - LO: 8-2 SMAL.LONG.20.08.04 - LO: 8-4 SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 119. An ordinary corporation, taxed by the federal government as a separate legal entity ANSWER: c POINTS: 1 120. A form of corporation that shields owners from one another's liability and is set up for individuals in certain professional practices ANSWER: g POINTS: 1 121. A document that establishes a corporation’s existence ANSWER: d POINTS: 1 122. Liability on the part of an owner that extends beyond the owner’s investment in the business ANSWER: i POINTS: 1 123. A type of corporation that offers limited liability to its owners and passes taxable income or losses on to the stockholders ANSWER: h POINTS: 1 124. The liability of each partner resulting from any one partner's ability to legally bind the other partners ANSWER: e POINTS: 1 125. A legal entity formed by two or more co-owners to operate a business for profit ANSWER: f POINTS: 1 126. A form of corporation that creates a positive social or environmental impact while maintaining high standards of transparency and accountability Copyright Cengage Learning. Powered by Cognero.

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ANSWER: b POINTS: 1 Match the term with its definition. a. board of directors b. general partner c. legal entity d. limited liability company e. limited partners f. nonprofit corporation g. partnership agreement h. sole proprietorship i. social network DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team 8-2 Common Legal Forms of Organization 8-4 Specialized Legal Forms of Organization 8-6 Making the Most of a Board of Directors QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 SMAL.LONG.20.08.02 - LO: 8-2 SMAL.LONG.20.08.04 - LO: 8-4 SMAL.LONG.20.08.06 - LO: 8-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/27/2018 5:04 PM 127. The governing body of a corporation, elected by the stockholders ANSWER: a POINTS: 1 128. A partner in a limited partnership who is not active in the management of the partnership and has limited personal liability ANSWER: e POINTS: 1 129. A business organization that is recognized by the law as having a separate legal existence ANSWER: c POINTS: 1 130. A form of corporation for enterprises established to serve civic, educational, charitable, or religious purposes; not for generation of profits ANSWER: f Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 131. An interconnected system of relationships with other people ANSWER: i POINTS: 1 132. A partner in a limited partnership who has unlimited personal liability ANSWER: b POINTS: 1 133. A form of organization in which owners have limited liability but pay personal income taxes on business profits ANSWER: d POINTS: 1 134. A business owned by one person, who bears unlimited liability for the enterprise. ANSWER: h POINTS: 1 Match the term with its definition. a. corporation b. limited partnership c. management team d. organizational test e. piercing the corporate veil f. preemptive right g. reciprocation h. social capital i. strategic alliance DIFFICULTY: Easy REFERENCES: 8-1 Building a Management Team 8-2 Common Legal Forms of Organization 8-3 Considerations in Choosing an Organizational Form 8-4 Specialized Legal Forms of Organization 8-5 Forming Strategic Alliances QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.08.01 - LO: 8-1 SMAL.LONG.20.08.02 - LO: 8-2 SMAL.LONG.20.08.03 - LO: 8-3 SMAL.LONG.20.08.04 - LO: 8-4 SMAL.LONG.20.08.05 - LO: 8-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 12/31/2018 2:36 PM Copyright Cengage Learning. Powered by Cognero.

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135. Managers and other key persons who give a company its general direction ANSWER: c POINTS: 1 136. The right of stockholders to buy new shares of stock before they are offered to the public ANSWER: f POINTS: 1 137. A business organization that exists as a legal entity and provides limited liability to its owners ANSWER: a POINTS: 1 138. An organizational relationship that links two or more independent business entities in a common endeavor ANSWER: i POINTS: 1 139. A situation in which a court concludes that incorporation has been used to perpetrate a fraud, skirt a law, or commit some wrongful act, and it removes liability protection from the corporate entity ANSWER: e POINTS: 1 140. A partnership with at least one general partner and one or more limited partners ANSWER: b POINTS: 1 141. A powerful sense of obligation to repay in kind what another has done for or provided to us ANSWER: g POINTS: 1 142. Verification of whether a nonprofit organization is staying true to its stated purpose ANSWER: d POINTS: 1

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Chapter 09 - The Location Plan 1. A brick-and-mortar store is actually a general term that refers to a retail outlet dealing in building supplies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 2. The choice of a location for a physical facility is rarely a one-time decision. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 3. While one of the six key factors in determining a good location may carry more weight for a particular business and its unique situation, each factor should always have some influence on the final location decision. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 3:53 PM 4. Most state and city governments go to great lengths to support startups. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 5. Customer accessibility is vital in industries in which the cost of shipping the finished product is high relative to the product's value. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 6. Business incubators rent space to new businesses or people wishing to start businesses but do not offer management advice or provide any other form of assistance. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 7. The primary factor in determining the location for a sawmill would most likely be customer accessibility. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 8. Many small business owners recognize the value of seeking assistance from local realtors in determining site availability and appropriateness. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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9. Sometimes an attorney can add an escape clause to a lease agreement that allows the lessee to exit the agreement under certain conditions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 10. Manufacturing equipment can be categorized as general-purpose and special-purpose. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 11. Bottling machines and manufacturing robots used in factories are examples of special-purpose equipment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 12. The amount of square feet of office area per employee has increased significantly in recent years. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 13. To maximize sales and profits, a discount shoe store should create an atmosphere similar to higher price point shoe stores because the customers will expect the same atmosphere. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 3:54 PM 14. Local zoning ordinances typically do not apply to home-based businesses. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 15. A home location is still almost always considered a temporary situation until the business grows. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 16. E-commerce can provide a benefit to startups with early cash flow problems by compressing the sales cycle. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies Copyright Cengage Learning. Powered by Cognero.

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17. An entrepreneur who works from home may deduct costs related to space used in the home for business from any taxes that may be owed from the venture's income, as long as he or she conforms to the rules established by the IRS. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 18. Because business-to-business (B2B) model success stories generally receive more publicity than business-to-consumer (B2C) model ventures do, the potential for B2C opportunities are overlooked. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 19. One of the disadvantages of operating a business-to-consumer (B2C) e-commerce business as opposed to a brick-andmortar store is lack of flexibility. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 20. The dollar amounts generated by firms using a business-to-business (B2B) model are significantly greater than those for firms without a business-to-consumer (B2C) model. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 21. It is possible for an entrepreneur to do business over the Internet without creating either a website or a storefront. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 22. Auction sites generate most of their revenue through listing fees and commissions. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 23. A website built on the content-based model offers only information about a business, its products, and other related matters. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 24. The role of a website can range from merely offering information and basic content to enabling complex business transactions. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM Copyright Cengage Learning. Powered by Cognero.

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25. Many e-commerce companies generate a lot of sales by merging the content- and transaction-based models into one website. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 26. Blogs and podcasts are among the emerging options for an online presence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 27. Many entrepreneurs start their online businesses as a part-time venture. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology Copyright Cengage Learning. Powered by Cognero.

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28. Research has shown that online businesses that begin as part-time ventures tend to have higher rates of failure than those launched by owners who choose to jump in with both feet from the start. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 29. Renee plans to open a gift shop in a tourist location. She will rely heavily on walk-in customers to support her business. Renee will need a a. clicks-and-mortar facility. b. bricks-and-clicks facility. c. brick-and-mortar facility. d. professionally developed website. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 30. Arthur's business needs a physical building. Arthur's most important decision will be a. where to locate. b. how much to spend. c. whether to rent or own. Copyright Cengage Learning. Powered by Cognero.

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d. whether to build or purchase an existing structure. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 31. Which of the following statements about location decisions is NOT true? a. The importance of the initial decision to locate a traditional physical building is underscored by both the high cost of such a place and the hassle of pulling up stakes and moving an established business. b. The choice of a location for a physical facility is rarely a one-time decision. c. The choice of a good location is much more vital to some businesses than to others. d. Regardless of the specific resources involved, every location decision should be based on certain fundamental principles that can guide the process. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 32. Which of the following is NOT one of the five key factors in determining a good business location? a. The entrepreneur's personal preference b. Business plan complexity c. Business environment conditions d. Site availability and costs ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 33. Bart is ready to look for a site for his new business. To help him in his search he should a. contact a local real estate agent. b. check property for sale ads in the local newspaper. c. check into site-selection software. d. check with the local small business development office. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 34. For a hair stylist, the top priority in the location decision would be a. his or her personal preference. b. the availability of resources. c. customer accessibility. d. business environment conditions. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM Copyright Cengage Learning. Powered by Cognero.

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35. Which of the following would be a critical consideration in the location decision for a manufacturing business? a. Future advertising costs b. Access to key suppliers c. An appropriate labor supply d. Customer accessibility ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 36. Customer accessibility is the most critical factor in evaluating a specific site for a a. clothing manufacturer. b. drugstore. c. car-parts maker. d. software development company. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 37. Callista can locate her business in any state regardless of its weather because she sells: a. air conditioners. b. outdoor swimming pools. c. consumer yard irrigation systems. d. mattresses. ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 38. Roger is analyzing regional differences in seeking a location for a new firm and is looking at states with favorable tax systems for small businesses. Based on this information, he should look at which of the following states? a. South Dakota b. Massachusetts c. Ohio d. New York ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze | Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 39. Which of the following statements concerning business environment conditions for a new business is true? a. State governments will help new business by levying taxes. b. Determining the zoning is important because it may limit a company's operations. c. Many states offer location incentives to attract jobs to very stable areas. d. Finding an area that has a low cost of living means a low standard of living for employees. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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40. Zoning ordinances often apply to factors related to a. nonrelated employees working in a home. b. commercial signage. c. the storage of hazardous materials. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 41. Which of the following would be a critical consideration in the location decision for a restaurant? a. Proximity to important sources of raw materials b. Access to key suppliers c. Access to good transportation d. Federal income taxes ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 42. A good reason for relocating a typical manufacturing business is to a. stabilize income taxes. b. increase customer traffic. Copyright Cengage Learning. Powered by Cognero.

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c. be closer to a pool of highly skilled labor. d. provide free-flow space. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 43. Calvert is contemplating building an aluminum smelting plant. The ratio of bauxite, the raw material from which aluminum is extracted, to aluminum is two to one. It takes two tons of bauxite to product one ton of usable aluminum. Calvert should locate his smelting plant close to a. his customers. b. the bauxite mine. c. transportation. d. an area with a suitable labor supply. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 44. Daisy is planning a clothing manufacturing company. When selecting the location for her production facility, Daisy will want to consider a. ease of access to her customers. b. ease of access to transportation. c. availability of suitable labor. d. the overall cost of living of an area. ANSWER: c POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 45. Companies that depend on semiskilled or unskilled workers usually located in a(n) a. rural area. b. area where the cost of living is low. c. area with no zoning ordinances. d. area with surplus labor. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 46. Which of the following is an advantage for choosing a hometown as a location for a new business venture? a. The entrepreneur knows the landmarks around his or her home community. b. It may be easier to establish credit. c. The entrepreneur is more likely than an outsider to be offered a better price on a building or land to locate his or her business. d. The risk is significantly reduced. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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47. Dallas is considering starting his business in his hometown. Which of the following is a reason why he should? a. He can get a more favorable tax treatment. b. The city government may waive any startup fees he must pay. c. His friends and relatives in the community may be quick to buy his product and also spread positive reports about it to others. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 48. Facilities that provide shared space, services, and management assistance to new businesses are called a. industrial parks. b. community development centers. c. shopping centers. d. business incubators. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 49. For many small business owners, the most important reason to lease rather than buy a facility is a. avoidance of a large cash outlay. b. freedom in modifying the building. Copyright Cengage Learning. Powered by Cognero.

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c. avoidance of interest payments. d. avoidance of liability lawsuits. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 50. An important advantage an entrepreneur gains by leasing rather than buying a facility is a. receipt of an investment tax credit. b. a decrease in risk by minimizing investment. c. a decrease in the amount of promotion required. d. a customized layout. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze | Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 51. According to the International Facility Management Association, nearly _____ percent of office spaces today follow the _____ concept. a. 25; flexible office b. 45; open-design c. 70; open-design d. 90; flexible office ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 5:12 AM 52. According to data compiled by the National Federation of Independent Business, what is the most important advantage of buying business equipment over leasing it, as reported by small business owners? a. Can treat the asset as they wish b. Can own the asset until they want to get rid of it c. Cheaper overall d. Puts the asset on the books ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 53. Harry is starting a business where he restores homes built before 1900. He is purchasing used equipment, specifically lathes, planing mills, and drill presses. This equipment is an example of _____ equipment. a. special-purpose b. product-layout c. general-purpose d. automated ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply Copyright Cengage Learning. Powered by Cognero.

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54. An example of special-purpose equipment for a carbonated beverage company is a(n) a. refrigerator that keeps the product at the appropriate temperature. b. bottling machine that adjusts pressure for different flavors. c. assembly line that moves the beverages to the loading dock. d. mixer that combines the ingredients in the proper order. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 55. Using special-purpose equipment in the manufacturing process can result in a. increased operator errors. b. higher labor cost per unit of product. c. a rise in accident rates. d. greater output per machine-hour of operation. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 56. Helen is planning to open a high-fashion clothing store for young professional women. Which of the following descriptors is the most important consideration for the fixtures? a. Economical b. Elegant c. Feminine Copyright Cengage Learning. Powered by Cognero.

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d. Practical ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 57. Eaton is writing the location plan for his business plan. He should be sure to identify the company's major equipment because a. this is the largest expense he will have for his startup. b. he does not plan to work from home. c. it is important to present the proper image to his clients. d. this can ensure that the financial section of the plan will include funds for their purchase. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 58. Genevieve just completed her residency and is ready to open her medical office as a general practitioner. The image her office should convey is a. trendy, minimalist, and futuristic with bold colors and modern art. b. old-fashioned, dark, and somber with dark colors and heavy furniture. c. solid, trustworthy, and confident with neutral colors and comfortable furniture. d. light-hearted and whimsical with pastel colors and playful art. ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 59. Businesses that operate in the home a. can increase profits by decreasing costs. b. require customer traffic. c. are called family businesses. d. are less common today than they were 10 years ago. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 60. According to government surveys, about _____ of all U.S. business owners choose to run their businesses primarily out of their home. a. 10 percent b. half c. 25 percent d. 35 percent ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM Copyright Cengage Learning. Powered by Cognero.

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61. Juanita is considering locating her consulting business in her home. Which of the following might be her greatest challenge? a. An increase in the amount of time needed to get the business running b. Maintaining a professional image c. An increase in the amount of taxes owed to the IRS d. A decrease in the amount of time spent with friends ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 62. Annie is starting a photography business and locating it in her family home. Which of the following aspects is critical in the balance between her business and her family? a. Making sure family members don't spoil the image of the business when clients arrive b. Having a professional studio area that is separate from the family area c. Shielding her family from the business taking over the home d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 63. Rachel is starting a daycare at her home in a suburban area. Which of the following professionals should she contact first before starting? a. The city's planning and zoning board to make sure she can have a business in the home b. Her CPA to determine if she can claim a tax deduction for the business Copyright Cengage Learning. Powered by Cognero.

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c. Her insurance agent to increase the policy for coverage on the equipment and business activities on site d. Her attorney to help draw up a business plan ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 64. Garland uses the family room of his home for his business. The children share his computer for their homework and games. The family room also contains the TV and homework space for the children. The IRS is likely to disallow his deduction for this space because a. a separate space must be clearly devoted to the activities of the business. b. IRS regulations restrict the use of a family room as the designated space for a home-based business. c. no deduction is allowed for space in the home used for a business. d. the IRS designates any home-based business as a hobby, and hobby expenses are not deductible. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 65. E-commerce refers to a. having an online website in addition to a brick-and-mortar facility. b. the facilitation of business by making initial contact by electronic means. c. the buying and selling of products or services on the Internet. d. a form of business that involves online trades and auctions. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 66. How does e-commerce benefit small firms? a. Small firms are often more "tech savvy," allowing quicker adoption of innovations. b. Large firms may not push the consumer toward the Internet, resulting in small firms being able to gain customers. c. E-commerce allows small firms to expand their reach beyond local markets. d. The government has committed significant resources to encourage small firms to adopt an e-commerce business model. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 67. Hermione decided to create a website to complement her bricks-and-mortar store. Which of the following would most likely be her primary motive for doing so? a. To allow her customers to preview her products before coming to her store b. To attract customers from outside her local area c. To keep up with the competition d. To reduce her overall expenses ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies Copyright Cengage Learning. Powered by Cognero.

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68. For small businesses, the Internet tends to blur ____ boundaries. a. industry b. geographic c. skill-dependent d. technological ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 69. An e-commerce operation can help a startup with early cash flow problems by a. focusing on customization. b. lowering labor costs. c. providing a cheaper distribution system. d. compressing the sales cycle. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 70. In the B2B model, the customers are a. businesses. b. other consumers. c. franchisees. d. auction participants. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 71. John created Acme Online to allow paper suppliers to compete for manufacturers' orders over the Internet in live auctions. This model would best be described as a. B2B. b. B2C. c. C2B. d. C2C. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 72. Jeff's Website Design and Data Storage deals directly with corporate customers online and builds websites and data storage to specifications after an order is placed. By reducing the firm's storage and carrying costs, this example illustrates that B2B firms can create a. greater efficiency in their operations. b. greater efficiency in their buying and selling activities. c. synergies between buying and selling. d. market reach through e-commerce. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 73. Amazon and Best Buy are examples of _____ firms. a. B2B b. B2C c. C2C d. C2B ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 74. Which of the following is a challenge for a B2C e-commerce business? a. The amount of time involved in modifying the appearance of the website b. The inability to change prices quickly c. The inability to change merchandise mixes quickly d. Customers who refuse to purchase a product without first seeing it ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM Copyright Cengage Learning. Powered by Cognero.

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75. ShoeBiz produces shoes that until recently have been available only at the most exclusive stores. ShoeBiz decided to create its own website and sell directly to the consumer. This strategy is known as a. intermediation. b. disintermediation. c. disinterment. d. dismantling the distribution chain. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 76. Jason has neither a website nor a storefront. Instead, he lists his products for sale on a site that provides customers with the ability to list products for potential builders. Jason is using a _____ site. a. C2C b. C2B c. B2C d. B2B ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 77. Sites such as eBay and uBid.com derive most of their revenues from a. banner ads. b. listing fees and commissions. Copyright Cengage Learning. Powered by Cognero.

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c. corporate sponsors. d. investors. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 78. A variation of the information-based model is sometimes called the _____ model. a. electronic b. emerging c. content-based d. transaction-based ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 79. Reliable Construction created a website to post photos of some of their completed projects and display their address and phone number, along with a list of the types of projects they can complete. Reliable has used the _____ model. a. transaction-based b. content-based c. information-based d. customer-relationship-based ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 80. The major difference between the information-based model and the content-based model is the a. presence of ads in the content-based model. b. ability to contact the site developer in the information-based model. c. presence of an order-processing feature in the information-based model. d. the ability for the visitor to post comments on the content-based model. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 81. Melissa would like to reduce the number of phone calls she gets from customers who want to place orders. Which model would best work for Melissa? a. Information-based model b. Content-based model c. Transaction-based model d. Customer-relationship-based model ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/2/2019 2:56 PM

82. Steve started a Web-based business offering a mechanism for buying and selling antiques. He has set up his company using the ____ model. a. transaction-based b. content-based c. information-based d. premium ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 83. Ethical questions are being raised about the merging of the _____ and _____ models on one website. a. information-based; content-based b. information-based; transaction-based c. content-based; transaction-based d. content-based; blogging ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 84. Which emerging model of e-commerce is used to generate considerable income from advertising? a. B2C b. Disintermediation c. Blogging d. Auction site Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 85. Which of the following statements about starting a business online as a part-time entity is true? a. While launching a business online as a part-time startup typically has a lower cost, the overall cost is greater as the company grows. b. Flexibility is the main reason why an entrepreneur will start a business in this format. c. Starting an Internet-based businesses on a part-time basis increases the risk that the company will fail. d. Holding on to a full-time career while launching a new venture on the side can be extremely grueling. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 3:55 PM 86. What are the benefits and drawbacks of leasing, as opposed to purchasing, a building space? ANSWER: Although more small business owners choose to purchase rather than lease their buildings, the benefits of leasing can sometimes outweigh the gains of owning: • • • •

A large cash outlay is avoided, which can be especially important for a new small firm that lacks adequate financial resources. Risk is reduced by minimizing investment and by postponing commitments for space until the success of the business is assured and facility requirements are better known. It is usually more affordable to lease in a high-image area than to buy in a prime location. Leasing allows the entrepreneur to focus on running the business rather than managing a property.

However, there clearly are disadvantages to leasing as well. Those who buy will benefit financially when a well-selected property appreciates in value, and their facilities costs will Copyright Cengage Learning. Powered by Cognero.

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be stable and predictable over time. Just as important, they won't need to ask permission to make future changes or additions to the property. POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 3:58 PM 87. What are the advantages of locating a startup in one's home community? ANSWER: Locating a business in one's home community may offer certain unique advantages that cannot be found elsewhere: • • • • •

From a personal point of view, the entrepreneur may generally appreciate and feel comfortable with the atmosphere of his or her home community. It may be easier to establish credit with hometown bankers who know an entrepreneur's personal background and reputation. Having personal connections in the local business community can lead to invaluable business advice. If local residents are potential customers, the small business owner probably will have a better idea of their tastes and preferences than would an outsider. Friends and relatives in the community may be quick to buy the product or service and gladly spread positive reports about it to others.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 1/3/2019 4:05 PM DATE MODIFIED: 1/3/2019 4:17 PM 88. Describe the critical resource considerations that should guide the location decision. ANSWER: Access to raw materials, suitable labor, crucial suppliers, and transportation are some of the factors that have a bearing on location selection. Proximity to important sources of raw materials and an appropriate labor supply are particularly critical considerations in the location of most manufacturing businesses, whereas access to key suppliers is more likely to Copyright Cengage Learning. Powered by Cognero.

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influence site selections for retail outlets and restaurant operations. If the raw materials required by a company's operations are not readily available in all areas, then regions in which these materials abound will offer significant location advantages. This is especially true for businesses that are dependent on bulky or heavy raw materials that lose much of their size or weight in the manufacturing process. The suitability of the labor supply for a manufacturer depends on the nature of its production process. • • •

Labor-intensive operations need to be located near workers with appropriate skills and reasonable wage requirements. A history of acceptable levels of labor productivity and peaceful relations with employers in a particular area is beneficial to almost any production operation. Companies that depend on semiskilled or unskilled workers usually locate in an area with surplus labor, while other firms may need to be close to a pool of highly skilled labor.

If the required talent is unavailable, relocation may be necessary, even it if means moving to another state. Access to good transportation is important to many companies. For example, good highways and bus systems provide customers with convenient access to retail stores, which encourages sales. For small manufacturers, quality transportation is especially vital. They must carefully evaluate all trucking routes, considering the costs of both transporting supplies to the manufacturing location and shipping the finished product to customers. POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-1 Locating the Brick-and-Mortar Startup QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 1/3/2019 4:12 PM DATE MODIFIED: 1/3/2019 4:16 PM 89. Discuss the challenges that an entrepreneur faces in designing the new operation's physical facilities. ANSWER: When specifying building requirements, an entrepreneur must avoid committing to a space that is too large or too luxurious for the company's needs. At the same time, the space should not be so small or limiting that operations are hindered or become inefficient. The general suitability of a building for a given type of business operation depends on the functional requirements of the enterprise. Other important factors to consider include the age and condition of the building, potential fire hazards, the quality of heating and air conditioning systems, the adequacy of lighting and restroom facilities, and appropriate entrances and exits. Also, the comfort, convenience, and safety of the business's employees and customers should be taken into consideration. POINTS: 1 DIFFICULTY: Hard Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 90. Distinguish among manufacturing equipment, retail equipment, and office equipment using a candle factory and a candle store as examples. ANSWER: Machines used in the candle factory would include general-purpose equipment (machines that serve many functions in the production process) and special-purpose equipment (machines designed to serve specialized functions in the production process). A candle store would need retailing equipment such as merchandise-display racks and counters, storage racks, shelving, shopping carts, cash registers, and other items to facilitate selling. Both the candle factory and candle store would need office equipment—furniture, filing and storage cabinets, computers, printers, telephones, and other such items. POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-2 Designing and Equipping the Physical Facilities QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.02 - LO: 9-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 3:59 PM 91. Discuss the attractions and challenges of operating a home-based business. ANSWER: Attractions include financial considerations (increasing profits by reducing costs) and family lifestyle considerations (spending more time with family members). Challenges include managing family and business conflicts (business and family activities that interfere with one another), preserving the firm's business image (maintaining an image of professionalism at the home when clients visit), and dealing with legal issues (avoiding zoning ordinance violations, complying with tax regulations, obtaining appropriate insurance coverage). POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-3 Locating the Startup in the Entrepreneur's Home QUESTION TYPE: Essay HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.03 - LO: 9-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 4:00 PM 92. List and describe the different e-commerce business models related to the type of customer served. Provide an example of a business that uses each type of model. ANSWER: There are three major categories of e-commerce business models: 1. Business-to-business model. A business-to-business (B2B) model is based on selling to business customers electronically. The dollar amounts generated by firms using a business-to-business (B2B) model are significantly greater than those for firms with a business-to-consumer (B2C) model. B2B operations come in all shapes and sizes, but the most popular form of this strategy emphasizes sales transactions. By using online capabilities, a B2B firm can achieve greater efficiency in its buying and selling activities.

Example: Hewlett-Packard 2. Business-to-consumer model. The business-to-consumer model focuses on sales of products or services to final consumers. B2C ventures sell a wide variety of products, with offerings ranging from clothing to pet items, computer software to groceries, and much more. The B2C model offers three main advantages over brick-and-mortar retailing: convenient use, immediate transactions, and round-the-clock access to a broad array of products and services.

Example: Amazon 3. Consumer-to-consumer model. The consumer-to-consumer (C2C) model is usually set up around Internet auction sites that allow individuals to list products available for sale to potential bidders.

Example: eBay POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply | Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM Copyright Cengage Learning. Powered by Cognero.

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93. Discuss the three ways of categorizing e-commerce models as they relate to a firm's intended level of online presence. ANSWER: 1. Information-Based Model. A website built on the information-based model offers only information about a business, its products, and other related matters. It is typically just a complement to an existing brick-and-mortar facility.

2. Content-Based Model. The content-based model of e-commerce is a variation of the information-based alternative in that it also features a website that provides access to information but not the ability to make purchases. Rather than selling products or services, a content-based website provides information (content) for those who visit it, usually with the hope of generating revenue through advertising or by directing those visitors to other websites. 3. Transaction-Based Model. In a transaction-based model of e-commerce, a website is set up to provide a mechanism for buying or selling products or services. POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 94. What are some emerging options for online businesses? ANSWER: Emerging platforms for online ventures include blogging, podcasting, and creating a following on YouTube or Pinterest to generate revenue from ads and sponsorships, donations, subscription charges, or fees for access to live events. POINTS: 1 DIFFICULTY: Hard REFERENCES: 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM Match the term with its definition. a. auction sites Copyright Cengage Learning. Powered by Cognero.

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b. brick-and-mortar facility c. business incubator d. business-to-business (B2B) model e. business-to-customer (B2C) model f. consumer-to-consumer (C2C) model g. content-based model h. disintermediation i. e-commerce j. general-purpose equipment k. home-based business l. information-based model m. special-purpose equipment n. transaction-based model o. zoning ordinances DIFFICULTY: Easy REFERENCES: 9-1 Locating the Brick-and-Mortar Startup 9-2 Designing and Equipping the Physical Facilities 9-4 E-Commerce: Locating a Startup on the Internet QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.09.01 - LO: 9-1 SMAL.LONG.20.09.02 - LO: 9-2 SMAL.LONG.20.09.04 - LO: 9-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies Strategy Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/2/2019 2:56 PM 95. The bypassing of a middleman by a producer or wholesaler in order to sell its product or service directly to the final consumer ANSWER: h POINTS: 1 96. Web-based businesses offering participants the ability to list products for consumer bidding ANSWER: a POINTS: 1 97. A facility that provides shared space, services, and management assistance to new businesses ANSWER: c POINTS: 1 98. A business model in which a website simply offers information about a business, its products, and other related matters Copyright Cengage Learning. Powered by Cognero.

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ANSWER: l POINTS: 1 99. A business that maintains its primary facility in the residence of its owner ANSWER: k POINTS: 1 100. A business model in which a website provides a mechanism for buying or selling products or services ANSWER: n POINTS: 1 101. A business model in which a website provides information (content) that attracts visitors, usually with the hope of generating revenue through advertising or by directing those visitors to other websites ANSWER: g POINTS: 1 102. Local laws regulating land use ANSWER: o POINTS: 1 103. A business model usually set up around Internet auction sites that allow individuals to list items available for sale to potential bidders ANSWER: f POINTS: 1 104. Machines designed to serve specialized functions in the production process ANSWER: m POINTS: 1 105. A business model based on selling to business customers electronically ANSWER: d POINTS: 1 106. Machines that serve many functions in the production process ANSWER: j POINTS: 1 107. The traditional physical facility from which businesses have historically operated ANSWER: b POINTS: 1 108. The buying and selling of products or services on the Internet ANSWER: i POINTS: 1

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Chapter 10 - Understanding a Firm's Financial Statements 1. A company's total assets will always equal total debt minus owners' equity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-0 The Lemonade Kids QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.00 - LO: 10-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 2. The income statement provides a snapshot of a business's financial position at a specific point in time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 3. Jan's bank has asked her to show them how her firm's financial position has changed in the past year. She should provide the company's balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 4. The income statement answers the question "How profitable is the business?" a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 5. The terms earnings, profits, and income refer to different amounts on the income statement. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 6. Profits reward owners for investing in a company, but they do little to promote future growth. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 7. Depreciation expense is the cost of a firm's land and building, allocated over the asset's useful life. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 8. Dividends paid to a firm's owners are not considered an expense in the income statement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM Copyright Cengage Learning. Powered by Cognero.

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9. The balance sheet shows a firm's assets, liabilities, and owners' equity at a specific point in time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 10. Assets that can be converted into cash relatively quickly are said to be liquid. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 11. Accounts receivable represent credit extended by suppliers to a firm when it purchases inventory. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom's: Remember 8/29/2018 11:23 AM 1/3/2019 7:23 AM

12. Accounts payable, accrued expenses, 2-year notes payable, and 90-day notes are all short-term liabilities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 13. Owners' equity represents the owner's investment in the business, which can be either his or her cash invested in the business or money borrowed from a bank to purchase fixed assets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 14. Jane has been asked by a group of investors to give an overall picture of her firm's financial situation. To do so, she should provide them with a copy of the firm's income statement and balance sheet. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 15. The statement of cash flows answers the questions "Where did the cash come from?" and "Where did the cash go?" a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 16. A profitable company will always have positive cash flows. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM Copyright Cengage Learning. Powered by Cognero.

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17. The purchase of fixed assets, such as equipment and buildings, should be included in both the income statement and the balance sheet. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 18. The major difference between cash-basis accounting and accrual-basis accounting is when the firm records expenses and profits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 19. The three activities that explain the cash inflows and outflows of a business are the operating, selling, and financing activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 20. In order to determine the cash flows from day-to-day operations, the firm must convert the company's income statement from a cash basis to an accrual basis. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 21. Liquidity represents the degree to which a firm has cash available to meet maturing debt obligations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:00 AM 22. The best financial ratio to determine a company's ability to pay debt is the operating profit margin. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:00 AM 23. A conventional measure of a firm's liquidity is a comparison of current assets to current liabilities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:00 AM 24. Net income is used to measure the return on the firm's total assets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:23 AM 1/3/2019 9:01 AM

25. To determine the debt ratio, the total debt is divided by the total income. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:01 AM 26. While increasing debt levels can increase the owner's return on equity, it also reduces risk. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:02 AM 27. Money borrowed to pay for assets is called a. owners' equity. b. debt. c. receivables. d. cash flow. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-0 The Lemonade Kids Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.00 - LO: 10-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 28. Regina wants to open her own coffee stand. To do that she will need equipment and supplies. The two methods Regina can use to pay for these items are _____ and _____. a. cash flow; balance sheets b. accounts receivable; accounts payable c. assets; liabilities d. debt; equity ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-0 The Lemonade Kids QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.00 - LO: 10-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:02 AM 29. Bernard has just learned that on the balance sheet, a company's total assets must equal the _____ plus the _____. a. money borrowed from others; money invested by the owners b. accounts receivable; accounts payable c. accumulated depreciation; asset value d. net profit; retained earnings ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-0 The Lemonade Kids QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.00 - LO: 10-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:23 AM 1/3/2019 7:23 AM

30. Cameron and Ashley bought $40 of "premium pink lemonade mix" and paper cups for their lemonade stand. These items are considered a. equity. b. fixed assets. c. inventory. d. cost of goods sold. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-0 The Lemonade Kids QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.00 - LO: 10-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 31. If a business allows a customer to buy on credit, which of the following increases? a. Debt b. Inventory c. Accounts Payable d. Accounts Receivable ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-0 The Lemonade Kids QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.00 - LO: 10-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:02 AM 32. Walter knows the result of the equation "Sales – Expenses = Profits" can be found on the a. statement of cash flows. b. income statement. c. statement of financial position. Copyright Cengage Learning. Powered by Cognero.

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d. balance sheet. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 33. Horace is reviewing a document that shows the results of his firm's operations over a period of one year. Horace is looking at the a. income statement. b. balance sheet. c. statement of cash flows. d. statement of financial position. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:03 AM 34. Kate's banker would like to know the profit of her business from January 1 through December 31. She should show him the a. statement of cash flows. b. income statement. c. balance sheet. d. harvest plan. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 35. To determine his company's net profits, Edward should a. deduct cost of goods sold from sales. b. add interest paid and depreciation expense. c. deduct income taxes from profits before taxes. d. add income taxes paid and income before taxes. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 36. To calculate his company's _____, Edgar will deduct operating expenses from gross profits. a. cost of goods sold b. profits before taxes c. operating profits d. retained earnings ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:03 AM Copyright Cengage Learning. Powered by Cognero.

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37. Marvin is preparing one of the annual financial statements. Which of the following should be included in operating expenses? a. Marketing-related expenses b. The cost for independent dealers to prepare for the distribution of the product c. Interest on all loans d. Income taxes ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 38. To determine her company's profits before taxes, Marilyn will have to deduct the firm's interest expense from its a. total profits. b. projected income. c. net profits. d. operating profits. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 39. From her sales income, Barbara has subtracted cost of goods sold, operating expenses, interest expense, and income taxes. What she has left is her company's a. total profits. b. projected income. c. net profits. d. operating profits. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 40. The owners of ABC, Inc. may expect to be paid a share of the profits of the company. These payments to owners are called a. return on investment. b. dividends. c. current expenses. d. long-term debt. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 41. On the income statement, profit margins are expressed as a percentage of a. debt. b. expenses. c. equity. d. sales. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 42. The income statement answers which of the following questions? a. How much cash did the firm generate? b. How profitable was the business? c. How much money does the company owe? d. How much money did the owners invest? ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 43. For investment purposes, Wilma needs a snapshot of the firm's financial position at a specific point in time. She should look at the a. marketing plan. b. statement of cash flows. c. balance sheet. d. income statement. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM Copyright Cengage Learning. Powered by Cognero.

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44. Xavier wants to know how much his company owns and how much it owes. He should look at the a. balance sheet. b. income statement. c. statement of cash flows. d. asset list. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 45. Buildings and machinery are considered to be _____ assets. a. current b. fixed c. short-term d. other ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 46. When Darla prepares her company's balance sheet, she should include _____ in the list of current assets. a. equipment b. land c. leased property d. accounts receivable ANSWER: d POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 47. Denver wants to make sure he puts his company's assets in the correct categories. Which of the following is an example of a current asset? a. Land b. Inventory c. Equipment d. Buildings ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 48. Richard has in his warehouse some raw materials and finished goods that he has ready to fill customer orders. These are two types of a. accounts payable. b. accounts receivable. c. cost of goods. d. inventory. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Apply 8/29/2018 11:23 AM 1/3/2019 7:23 AM

49. Eugenia's company bought a delivery truck to deliver merchandise to customers. This truck should appear as _____ on the balance sheet. a. a current asset b. inventory c. a fixed asset d. a short-term investment ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 50. Candace purchased a car for her company's exclusive use. The value of this car a. is constant over time. b. increases with each use of the asset. c. decreases over time. d. increases over time. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 51. Astoria is using a software application to prepare the balance sheet. Which of the following should be included in the fixed assets category? Copyright Cengage Learning. Powered by Cognero.

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a. Land b. Copyrights c. Contingency funds d. Goodwill ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 52. A two-year-old asset has a useful life of 10 years. Its initial purchase cost was $450,000, and it is depreciated by 10 percent annually. What is the remaining depreciable value of the asset? a. $0 b. $90,000 c. $200,000 d. $360,000 ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 53. Which of the following assets would considered an other asset? a. Land b. Machinery c. Contingency funds d. Goodwill ANSWER: d POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 54. Stephanie ordered merchandise from one of her vendors, but she doesn't have to pay for it right away. The amount of this purchase will increase Stephanie's a. accounts receivable. b. assets. c. balance sheet. d. accounts payable. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 55. XYC Corporation pays its income taxes quarterly but withholds payroll taxes from its employees' paychecks each week. Until the taxes are actually paid to the IRS, they appear on the balance sheet as a. an asset. b. an account receivable. c. a liability. d. long-term debt. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Apply 8/29/2018 11:23 AM 1/3/2019 7:23 AM

56. Ignatio applied for a loan for his business that he will repay in nine months. The best way to describe this loan is as a(n) a. account payable. b. accrued expense. c. short-term note. d. long-term note. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 57. The debts that Rhonda's company will repay within the next _____ are considered to be current debt. a. two years b. 18 months c. five years d. 12 months ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 58. Raul needed an expensive piece of equipment to expand his business. He borrowed the money from the bank and pledged the equipment as _____. If Raul does not repay the loan, the bank can take his equipment. Copyright Cengage Learning. Powered by Cognero.

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a. a promissory note b. collateral c. a depreciable asset d. long-term debt ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 59. Martina invested her savings into her business when she started it. Later she added more capital, and she has kept some of her profits. Together, these are known as a. debt capital. b. accrued expenses. c. owners' long-term debt. d. owners' equity. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 60. For Webster to understand how his company performed during calendar year 2018, he must begin with the firm's financial position on a. January 1, 2018. b. July 1, 2018. c. September 30, 2017. d. June 30, 2017. ANSWER: a POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 61. Which of the following statements about a firm's financial statements is true? a. An income statement helps a small business owner know the financial strengths and capabilities of the business—something that cannot be known in any other way. b. Small business owners tend to pay close attention to the firm's income statement, but much less attention to the balance sheet. c. A mistake that many small business owners is viewing the balance sheet and income statement as complements of each other rather than treating them as separate reports. d. None of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 62. To understand how his firm performed during the past year, Josh must know a. the firm's financial position at the beginning of the year. b. the firm's financial position at the end of the year. c. the firm's profits during the year. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 63. Which of the following questions does a statement of cash flows answer? a. How profitable is the business? b. How much debt has the business accumulated? c. What is the degree of liquidity for the business? d. Where did the cash come from? ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 64. The statement of cash flows measures cash flows on a(n) _____ basis. a. annual b. accrual c. cash d. normalized ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 65. Natalya reports profits when cash is received and records expenses when they are paid. She is using Copyright Cengage Learning. Powered by Cognero.

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a. a statement of cash flows. b. accrual-basis accounting. c. cash-basis accounting. d. liquid assets. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:04 AM 66. Coronado cannot use the income statement as a measure of cash flows because it is calculated on a(n) _____ basis rather than a(n) _____ basis. a. annual; cash b. annual; accrual c. accrual; cash d. cash; accrual ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 67. Which of the following is a reason why profits based on an accrual-basis accounting system will differ from the firm's cash flows? a. Sales reported in an income statement includes only cash sales rather than both cash and credit sales. b. The depreciation expense shown in an income statement is an expense involving cash. c. Cash spent for inventory doesn't represent all inventory purchases since some inventory is financed by credit. d. On an income statement, profits are reported when cash is received, and expenses are recorded when they are paid. ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 68. The cash flow activities on the statement of cash flows are divided into which of the following categories? a. Operating activities, investing activities, and financing activities b. Investing activities, purchasing activities, and financing activities c. Operating activities, investing activities, and equity activities d. Operating activities, purchasing activities, and financing activities ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 69. Depreciation is added back on the statement of cash flows in which of the following sections? a. Financing Activities b. Purchasing Activities c. Investment Activities d. Operating Activities ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Remember 8/29/2018 11:23 AM 1/3/2019 7:23 AM

70. In order to determine cash flows from operations, the owner must add back the depreciation expense to the net profits and then a. subtract any decrease in accounts payable. b. add any increase in accounts receivable. c. add any increase in inventory. d. subtract any decrease in inventory. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:04 AM 71. To determine how much Harlan sold to customers, he must a. add the increase in accounts receivable to total sales. b. subtract the increase in accounts receivable from total sales. c. add the increase in accounts payable to total cash. d. subtract the increase in liabilities from owners' equity. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 72. The payment of dividends to owners of a business would _____ on the statement of cash flows. a. be recorded in the Operating Activities section Copyright Cengage Learning. Powered by Cognero.

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b. be recorded in the Investing Activities section c. be recorded in the Financing Activities section d. not be recorded ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 73. Fatima borrowed money from the bank to expand her business. She plans to repay the loan within 12 months. How is this reflected on the statement of cash flows? a. As an increase in owners' equity and an increase to cash b. As an increase to cash c. As a decrease to cash d. As an increase to current liabilities ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:05 AM 74. The liquidity of a firm is a. measured by a ratio of current assets to current liabilities. b. not important to the company's financial health. c. the ability of the firm to sell its products quickly. d. a measurement of spontaneous financing. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:05 AM 75. Comparing this year's results to last year's, Hector discovered that his firm's current ratio improved from 1.5 to 2.0. Which of the following has happened? a. Current liabilities have decreased. b. Fixed assets have increased. c. Owners' equity has increased. d. Long-term debt has decreased. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:06 AM 76. If a firm's current ratio _____, its liquidity _____. a. increases; increases b. increases; decreases c. decreases; increases d. increases; remains the same ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:23 AM 1/3/2019 9:06 AM

77. Irma's current ratio is 2.5. This means that a. for every dollar of current assets, Irma has $2.50 in current liabilities. b. for every dollar of current liabilities, Irma has $2.50 in current assets. c. Irma has enough cash to pay her debts for the next 2.5 years. d. Irma can borrow 2.5 times her annual sales. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:07 AM 78. Jasper bought some new equipment for his business. Six months later, he wants to know whether this was a good idea. To do that, he can calculate the a. current ratio. b. debt ratio. c. return on equity. d. return on assets. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:07 AM 79. Kermit calculated his total asset turnover to be 1.13. This tells Kermit that every a. dollar of assets generates $1.13 in sales. b. dollar of sales costs Kermit $1.13 to generate. c. year he turns his inventory 1.13 times. Copyright Cengage Learning. Powered by Cognero.

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d. dollar of assets generates $1.13 in profits. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:08 AM 80. To determine his company's return on assets, Harold should divide the firm's operating profits by a. sales. b. current liabilities. c. total assets. d. current assets. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:08 AM 81. Lance is trying to decide whether to purchase a new bulldozer to expand his business. He is confident he has enough work to keep the bulldozer busy and that repaying the loan will not be a problem. What advice would you give Lance? a. If the interest rate on the loan is less than the return on this asset, buy. b. If the return on this asset is more than the return on his equity, don't buy. c. If his current return on equity is greater than the return on this asset, buy. d. If his total asset turnover rate is greater than one, don't buy. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:09 AM 82. To increase her firm's return on equity, Latitia could _____ the amount of _____. a. increase; assets the company owns b. increase; debt the company owes c. decrease; liabilities the company has d. decrease; inventory the company carries ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:09 AM 83. What five areas of business activity need to be examined to answer the question "How profitable is the business?" ANSWER: The income statement reports financial information related to five broad areas of business activity: 1. Sales (revenue). 2. Cost of producing or acquiring the goods sold by the company. 3. Operating expenses, such as marketing expenses, rent, managers' salaries, and depreciation expense. 4. Interest expense. 5. Tax payments. POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-1 The Income Statement QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Understand 8/29/2018 11:23 AM 1/3/2019 9:11 AM

84. What accounts would be included as operating activities and financing activities for an income statement? ANSWER: Operating activities would include sales (revenue) – cost of goods sold = gross profits -– operating expenses = operating profits. Financing activities would include interest expense (which is subtracted from operating profits in the Operating Activities section) to equal profits before taxes. POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-1 The Income Statement QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:11 AM 85. Trucks for Stuff is a one-year-old company that provides statewide moving services to customers. Describe the types of current, fixed, and other assets Trucks for Stuff would have. ANSWER: Current Assets • •

•

Cash. The business should have cash on hand for day-to-day business operations. This money should be easily accessible. A marketable security that could be sold and liquidated quickly might also be expected. Accounts Receivable. Trucks for Stuff probably has accounts receivable set up for customers. This option is for people who do not have the cash at the time of the sale but have been given credit terms to pay the business for its services—usually on a 30-day period. Inventory. Trucks for Stuff may not have inventory, because they are providing a service to the customers instead of selling a product.

Fixed Assets • • •

Machinery/Equipment. The company would have trucks as well as office equipment. Building. It could also have a building to store the trucks not being used. Land. The company could own the location of the business.

Other Assets • •

POINTS:

Patents/Copyrights. These assets would not be expected. Goodwill. If the company has been successful in its first year, this asset would be possible.

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DIFFICULTY: Hard REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:12 AM 86. List and describe some sources of current debt. ANSWER: Current debt (or short-term liabilities) involves borrowed money that must be repaid within 12 months. Examples of current debt include the following: • • •

Accounts payable. The credit extended by suppliers to a firm when it purchases inventory. Accrued expenses. Operating expenses that have been incurred and are owed but not yet paid. Short-term notes. Amounts borrowed from a bank or other lending institution, for 12 months or less.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:14 AM 87. Compare and contrast the income statement and balance sheet. What is important to know about each statement to determine how a company performed during the year?' ANSWER: While the income statement and balance sheet are two separate reports, they complement each other to give an overall picture of the firm’s financial situation. The income statement reports for a given period of time, while the balance sheet covers a specific point in time. Both of these entities are important in understanding the full financial situation of the business. To understand how a firm performed during a year, three values must be known: 1. The firm's financial position at the beginning of the year (previous year's balance sheet ending value). 2. The financial performance during the year (income statement for the year). Copyright Cengage Learning. Powered by Cognero.

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3. The financial position at the end of the year (current year's balance sheet ending value). POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-2 The Balance Sheet QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:15 AM 88. Briefly explain the difference between accrual-basis accounting and cash-basis accounting. ANSWER: • In accrual-basis accounting, profits are recorded when earned—whether the profits have been received in cash—and expenses are recorded when they are incurred— even if money has not actually been paid out. • In cash-basis accounting, profits are reported when cash is received, and expenses are reported when they are paid. POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:16 AM 89. Why do profits based on an accrual accounting system differ from profits based on a cash-based system? ANSWER: There are numerous reasons that profits based on an accrual-basis accounting system will differ from the firm's cash flows, including the following: 1. Sales reported in an income statement include both cash sales and credit sales. Thus, total sales do not correspond to the actual cash collected. 2. Cash spent for inventory doesn't represent all inventory purchases since some inventory purchases are financed by credit. 3. The depreciation expense shown in the income statement is not an expense involving cash. POINTS:

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DIFFICULTY: Hard REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:19 AM 90. Warren needs to generate cash flow for his lawn-mowing business. What three cash flow activities can he engage to bring in cash for his company? ANSWER: 1. Generating cash flow from day-to-day business operations (operating activities). Warren could schedule more lawns to be mowed and/or find more customers who are willing to pay him the day of service. Selling his service generates cash. 2. Buying or selling fixed assets (investing activities). If Warren has extra equipment that he is not using, it could be sold to generate an inflow of cash. 3. Financing the business (financing activities). Warren could put more money into the business himself or take a loan from a bank or investor to generate cash flow into his business. Depending on the investors, he could postpone dividend payments to keep more cash in the business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:19 AM 91. When an entrepreneur is trying to determine how management decisions have impacted the business for the past year, what four areas are critical? What ratios would need to be calculated to find answers? ANSWER: 1. The ability to pay debt as it comes due (current ratio). 2. The profits generated from the firm's assets (return on assets). 3. The amount of debt the firm is using (debt ratio). 4. The rate of return earned on owners' equity investment (return on equity). POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE:

1 Hard 10-4 Evaluating a Firm's Financial Performance Essay

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HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:20 AM 92. Erin, the owner of Sweets To Eat Ice Cream Shoppe, wants to know how her company is operating from a financial perspective. Her CPA has given her the following numbers: Sales, $325,000; Operating Profits, $50,000; Current Assets, $125,000; Current Liabilities, $40,000; and Total Assets, $350,000. The ice cream retail industry norms include Operating Profit Margin, 10%; Return on Assets, 11%; and Current Ratio, 2.7. Determine the company's liquidity and compare the value to the industry ratios. ANSWER: Current ratio =

= = 3.1 This high liquidity shows management has a high capacity to cover its short-term debt. POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:27 AM 93. Erin, the owner of Sweets To Eat Ice Cream Shoppe, wants to know how her company is operating from a financial perspective. Her CPA has given her the following numbers: Sales, $325,000; Operating Profits, $50,000; Current Assets, $125,000; Current Liabilities, $40,000; and Total Assets, $350,000. The ice cream retail industry norms include Operating Profit Margin, 10%; Return on Assets, 11%; and Current Ratio, 2.7. Determine the company's profitability on its assets and compare to the industry ratios. ANSWER:

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This high liquidity shows management has a high capacity to cover its short-term debt.

This number is below the industry norm of 1.1 (11% ÷ 10%). This value indicates that management is not using the shop's assets to generate sales as well as the industry. POINTS: 1 DIFFICULTY: Hard REFERENCES: 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 9:36 AM Match the term with its definition. a. accrual-basis accounting b. cash c. cash-basis accounting d. depreciable assets e. depreciation expense f. financial statements g. inventory h. liquidity i. operating profit margin j. return on assets k. return on equity DIFFICULTY: Easy REFERENCES: 10-0 Understanding a Firm's Financial Statements 10-1 The Income Statement 10-2 The Balance Sheet 10-3 The Statement of Cash Flows: An Overview 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.00 - LO: 10-0 Copyright Cengage Learning. Powered by Cognero.

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SMAL.LONG.20.10.01 - LO: 10-1 SMAL.LONG.20.10.02 - LO: 10-2 SMAL.LONG.20.10.03 - LO: 10-3 SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 94. An accounting method of recording profits when earned and expenses when incurred, whether the profits have been received in cash or the expenses paid ANSWER: a POINTS: 1 95. A measure of a firm's profitability relative to the amount of its assets, determined by dividing operating profits by total assets ANSWER: j POINTS: 1 96. Money in the bank as well as securities that can be sold very quickly, such as a government security ANSWER: b POINTS: 1 97. An accounting method of recording profits when cash is received and recording expenses when they are paid ANSWER: c POINTS: 1 98. A measure of how well a firm is controlling its cost of goods sold and operating expenses relative to sales, determined by dividing operating profits by sales ANSWER: i POINTS: 1 99. A measure of the rate of return that owners receive on their equity investment, calculated by dividing net profits by owners' equity ANSWER: k POINTS: 1 100. Assets whose value declines, or depreciates, over time ANSWER: d POINTS: 1 101. A firm's products held in anticipation of eventual sale in the ordinary course of business ANSWER: g POINTS: 1 102. The degree to which a firm has cash available to meet maturing debt obligations ANSWER: h Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 103. A firm's income statement, balance sheets, and statements of cash flows ANSWER: f POINTS: 1 Match the term with its definition. a. accounts payable (trade credit) b. accounts receivable c. accumulated depreciation d. common stock e. current assets (working capital) f. current debt (short-term liabilities) g. current ratio h. fixed assets (property, plant, and equipment [PPE]) i. gross fixed assets j. net fixed assets k. other assets DIFFICULTY: Easy REFERENCES: 10-2 The Balance Sheet 10-4 Evaluating a Firm's Financial Performance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.02 - LO: 10-2 SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 104. Physical assets that will be used in the business for more than one year, such as equipment, buildings, and land ANSWER: h POINTS: 1 105. The amount of credit extended to customers ANSWER: b POINTS: 1 106. Stock shares that represent ownership in a corporation ANSWER: d POINTS: 1 107. Outstanding credit that is owed to suppliers ANSWER: a POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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108. Assets that can be converted into cash relatively quickly ANSWER: e POINTS: 1 109. Borrowed money that must be repaid within 12 months ANSWER: f POINTS: 1 110. A measure of a company's relative liquidity, determined by dividing current assets by current liabilities ANSWER: g POINTS: 1 111. Intangible assets, such as patents, copyrights, and goodwill ANSWER: k POINTS: 1 112. Depreciable assets at their original cost, before any depreciation expense has been taken ANSWER: i POINTS: 1 113. Total (cumulative) depreciation expense taken over an asset's life ANSWER: c POINTS: 1 Match the term with its definition. a. accrued expenses b. cash flow activities c. cost of goods sold d. gross profits e. long-term debt f. long-term note g. net profits h. operating profits i. profit margins j. profits before taxes (taxable income) k. short-term notes l. statement of cash flows DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement 10-2 The Balance Sheet 10-3 The Statement of Cash Flows: An Overview QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 SMAL.LONG.20.10.02 - LO: 10-2 SMAL.LONG.20.10.03 - LO: 10-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Remember 8/29/2018 11:23 AM 1/3/2019 9:37 AM

114. Sales less the cost of goods sold ANSWER: d POINTS: 1 115. Operating, investing, and financing activities that result in cash inflows or outflows ANSWER: b POINTS: 1 116. Loans from banks or other sources with repayment terms of more than 12 months ANSWER: e POINTS: 1 117. A financial report showing a firm's sources of cash as well as its uses of cash ANSWER: l POINTS: 1 118. Operating expenses that have been incurred but not paid; shown as an expense in the income statement and as a liability in the balance sheet until paid ANSWER: a POINTS: 1 119. Earnings that may be distributed to the owners or reinvested in the company ANSWER: g POINTS: 1 120. Profits as a percentage of sales ANSWER: i POINTS: 1 121. The cost of producing or acquiring goods to be sold by a firm ANSWER: c POINTS: 1 122. Operating profits less interest expense ANSWER: j POINTS: 1 123. Agreements to repay cash amounts borrowed from banks or other lending sources, plus interest, for periods longer than 12 months ANSWER: f POINTS: 1 124. Agreements to repay cash amounts borrowed from banks or other lending sources within 12 months or less ANSWER: k Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 Match the term with its definition. a. balance sheet b. debt c. debt ratio d. dividends e. income statement (profit and loss statement) f. interest expense g. mortgage h. operating expenses i. owners' equity j. retained earnings k. total asset turnover DIFFICULTY: Easy REFERENCES: 10-1 The Income Statement 10-2 The Balance Sheet 10-4 Evaluating a Firm’s Financial Performance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.10.01 - LO: 10-1 SMAL.LONG.20.10.02 - LO: 10-2 SMAL.LONG.20.10.04 - LO: 10-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:23 AM DATE MODIFIED: 1/3/2019 7:23 AM 125. A long-term loan to purchase a building or land ANSWER: g POINTS: 1 126. Financing provided by creditors ANSWER: b POINTS: 1 127. Cumulative net profits retained in a company over the life of the business ANSWER: j POINTS: 1 128. Costs related to marketing and selling a firm's product or service, general and administrative expenses, and depreciation ANSWER: h POINTS: 1 129. Owners' cash investments in a company plus the net profits that have been retained in the firm Copyright Cengage Learning. Powered by Cognero.

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ANSWER: i POINTS: 1 130. A financial report showing the amount of profits or losses from a firm's operations over a given time period ANSWER: e POINTS: 1 131. A financial report showing a firm's assets, liabilities, and owners' equity at a specific point in time ANSWER: a POINTS: 1 132. The cost of borrowed money ANSWER: f POINTS: 1 133. A measure of what percentage of a firm's assets is financed by debt, determined by dividing total debt by total assets ANSWER: c POINTS: 1 134. A distribution of a firm's profits to the owners ANSWER: d POINTS: 1

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Chapter 11 - Forecasting Financial Requirements 1. The projections of a venture's profits, asset and financing requirements, and cash flows are essential in determining whether a venture is economically viable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-1 The Purpose of Financial Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.01 - LO: 11-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 2. Financial forecasts are required by lenders because they want to know how they will be paid back; investors will use the forecasts to value the company. a. True b. False ANSWER: True RATIONALE: Both lenders and investors want to know how they will be paid back. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-1 The Purpose of Financial Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.01 - LO: 11-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 3. Pro forma financial statements serve two purposes: forecast how profitable you can expect a firm to be and how much financing will be needed to finance a firm's assets. a. True b. False ANSWER: False RATIONALE: Pro forma financials are projected or anticipated financial outcomes. POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 11-1 The Purpose of Financial Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.01 - LO: 11-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 4. Profits reward an owner for investing in a company and constitute a primary source of financing for future growth if reinvested in the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-2 Forecasting Profitability QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.02 - LO: 11-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 5. Cost of goods sold is always fixed. a. True b. False ANSWER: False RATIONALE: Cost of goods sold can be can either be fixed or variable. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-2 Forecasting Profitability QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.02 - LO: 11-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM Copyright Cengage Learning. Powered by Cognero.

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6. Many small firms have a tendency to underestimate the amount of capital the business requires when beginning operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 7. Net working capital equals current assets less total liabilities and is a measure of a company's liquidity. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 8. High-tech businesses (such as computer manufacturers) generally require fewer assets than service businesses. a. True b. False ANSWER: False RATIONALE: These businesses typically require more assets. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 9. Marcia likes to use other people's money when financing her business. In this way, she "does more with less" by controlling resources without actually owning them. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 10. When graphed, entrepreneurs' sales projections for a new venture often resemble a hockey stick—the sales numbers are flat or rise slightly at first (like the blade of a hockey stick) and then soar upward (like a hockey stick's handle). a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 11. Bettina plans to draw an income from her new business but her personal living expenses are not needed in the financial plan unless these expenses are part of the capitalization of the business. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False RATIONALE: The owner’s personal living expenses should always be included in the financial plan. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 12. The percentage-of-sales technique is an effective method for a new company to estimate asset requirements because assets-to-liabilities ratios tend to be relatively constant within an industry. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 13. Because Liam's new restaurant had a high volume of sales, his inventory needs increased, illustrating that a firm’s asset needs are the primary force driving sales. a. True b. False ANSWER: False RATIONALE: A firm’s sales are the primary force driving future asset needs and the need for financing. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 14. The conventional measure of liquidity is the current ratio, which compares the current assets to current liabilities on a relative basis. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 15. Spontaneous debt financing results when accounts payable increase in proportion to a firm's sales. a. True b. False ANSWER: True RATIONALE: Spontaneous debt financing are short-term debts such as accounts payable that increase in proportion to a firm’s profits. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 16. Profits that are retained within the company rather than being distributed to the owners are referred to as retained income. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False RATIONALE: The term is retained earnings. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 17. A line of credit is a short-term loan used in a business to help with financing fixed assets. a. True b. False ANSWER: False RATIONALE: A line of credit is a short-term loan for a business to help with temporary needs, such as seasonal increases in inventory. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 18. Cash flow can be projected in two ways: using the income statement to project cash flows or preparing a cash budget. a. True b. False ANSWER: False RATIONALE: While one method of projecting cash flow is to prepare a cash budget, the second method is to project a cash flow statement using both the income statement and balance sheet. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 19. The cash budget is concerned specifically with dollars both received and paid out. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 20. Annual projections are adequate after year 2. a. True b. False ANSWER: True RATIONALE: They should be checked against actual results every month. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 21. Financial projections should be limited to the income statement to prevent information overload on lenders and investors. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False RATIONALE: Projections should include the income statement, balance sheet and cash flows. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 22. Mario has high hopes for his new business and anticipates a very large profit margin. In preparing his forecasts, he should use industry averages regardless of his hopes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 23. An entrepreneur should always project at least two scenarios for financial forecasting and budgeting: best case and worst case. a. True b. False ANSWER: False RATIONALE: Scenarios should be limited to two: most-likely and break-even. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 24. To be realistic, an entrepreneur should project profits only one year into the future. a. True b. False ANSWER: False RATIONALE: Projecting profits for a new company should be at least three years to five years into the future if it can be done with some confidence. POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 25. Which of the following sources of information would be the most inclusive for an entrepreneur engaging in financial forecasting? a. Attend trade shows b. Contact the industry association c. Access industry information from Dun & Bradstreet d. Talk to others in the industry ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM Copyright Cengage Learning. Powered by Cognero.

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26. Investors would like to know if Arthur's new business will have adequate cash flows. Arthur can provide this information in a. pro forma financial statements. b. historical financial statements. c. pro bono financial statements. d. quid pro quo financial statements. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-1 The Purpose of Financial Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.01 - LO: 11-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 27. Projecting financials may present a challenge because in a startup business, a. things seldom go as planned. b. things always go as planned. c. expenses are too complex. d. expenses are simple. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-1 The Purpose of Financial Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.01 - LO: 11-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 28. Roland has already projected his company's sales. The next step in forecasting his company's income is to project a. operating expenses. b. interest expense. c. taxes. d. cost of goods sold. ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 11-2 Forecasting Profitability QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.02 - LO: 11-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 29. Yvonne is planning a coffee shop. The cost of producing the coffee should be included in the _____ section of the pro forma financial statements. a. variable expense b. amount of sales c. cost of goods sold d. operating expense ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-2 Forecasting Profitability QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.02 - LO: 11-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 30. Where should Rhonda put the administrative expenses for her business when she prepares her financial forecasts? a. In the amount of sales section b. In the operating expenses section c. In the cost of goods sold section d. In the interest expense section ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-2 Forecasting Profitability QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.02 - LO: 11-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Apply 8/29/2018 11:24 AM 12/17/2018 11:16 AM

31. Verlin wants to avoid a common mistake often made by new entrepreneurs. Which of the following would you advise him to do? a. Spend as little as possible. b. Carry no inventory. c. Be sure to have adequate financing. d. Do without anything that is not absolutely essential. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 32. Marcia uses other people's money whenever possible to finance her business. She prefers to minimize and control rather than to maximize and own resources. This practice is known as a. high-stepping. b. bootstrapping. c. unethical business practice. d. taking advantage of others. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 33. Serena is preparing her budget for the upcoming year. This would be good time for her to Copyright Cengage Learning. Powered by Cognero.

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a. communicate with her suppliers and scrutinize her relationships with them. b. enforce a cost-containment strategy. c. up her expectations for the upcoming year. d. run best-case and worst-case scenarios. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 34. Which of the following is the best source of information when forecasting? a. Industry experts b. Trade associations c. Prospective customers d. Bankers ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 35. The method of forecasting asset requirements is called the _____ technique. a. percentage-of-inventory b. percentage-of-equity c. percentage-of-debt d. percentage-of-sales ANSWER: d POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 36. The assets-to-sales relationship tends to be relatively constant within an industry, allowing for a(n) _____ technique to be utilized in projecting asset requirements. a. percentage-of-sales b. bootstrap forecasting c. asset turnover ratio d. discounted sales ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 37. The greater a firm's sales, the greater the need for financing because of greater _____ requirements. a. asset b. employee c. marketing d. operational ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:24 AM 12/17/2018 11:16 AM

38. Liquid assets include a. accounts payable. b. equipment. c. working capital. d. office supplies. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 39. D&R Products forecasts that it will require $10,000 for equipment and depreciation will be over five years. The $10,000 will be reflected in the balance sheet as a. inventory. b. gross fixed assets. c. net fixed assets. d. accounts payable. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 40. A firm should finance its growth in such a way as to maintain adequate a. liquidity. b. inventory. Copyright Cengage Learning. Powered by Cognero.

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c. sales. d. volume. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 41. Alex wants to make sure he has enough liquid assets to pay his current bills. To do this, he should calculate his firm's a. debt ratio. b. statement of cash flows. c. current ratio. d. asset turnover ratio. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 42. Zeno had a great idea but no cash so he asked the bank for a loan to finance the entire operation. It seems he forgot that a bank would never provide _____ percent of the firm's financing. a. 25 b. 50 c. 75 d. 100 ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 43. D&R Products forecast a first-year asset requirement of $143,500; therefore, the total debt requirement is a. $143,500. b. a set percentage of sales. c. equal to the current ratio. d. dependent on the owner's equity amount. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 1:22 PM 44. As her accounts payable and accrued expenses rose along with her firm's sales, Ariel noticed that _____ occurs. a. spontaneous debt financing b. trade credit financing c. escalating debt d. asset-based financing ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM Copyright Cengage Learning. Powered by Cognero.

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45. For the typical small firm, the primary source of equity capital for financing growth is a. operating profits. b. outside investors. c. spontaneous debt financing. d. retained earnings. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 46. As Willard's business grows and prospers, his company's total assets requirements will equal a. total sources of financing less owner's investment and retained earnings. b. spontaneous debt financing plus bank loans plus owner's investment less retained earnings. c. total sources of financing less net assets and owner's investment. d. spontaneous debt financing plus bank loans plus owner's investment plus retained earnings. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 47. David has a company that decorates houses for the holidays. He has secured a $25,000 line of credit from his bank. David is most likely to use this line of credit for which of the following? a. A warehouse to store decorations until they are sold b. Labor to install the decorations in November c. A truck with a ladder to put up lights d. A full-time, year-round office person to answer phones and take orders ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 48. Jill's business has current assets of $50,000 and current liabilities of $25,000. Which of the following statements is true about her company's current ratio? a. The ratio is 50 percent and is acceptable for most industries. b. The ratio is 2.0 and is acceptable for most industries. c. The ratio is $25,000 and is not acceptable for most industries. d. The current ratio cannot be determined from the information given. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 1/3/2019 5:14 AM 49. Even though Miriam projected an annual positive cash flow, she may run out of cash if a. customers use debit cards for their purchases. b. her sales are seasonal. c. sales exceed her projections. d. she finds a less expensive supplier. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUS PROG: Reflective Thinking Operations Management Bloom’s: Apply 8/29/2018 11:24 AM 12/17/2018 11:16 AM

50. A golf club should break down its annual cash budget into shorter time units because a. of the seasonality of its sales. b. one year is too far into the future to predict. c. the marketing plans may change during the year. d. production breakdowns may alter the company's situation. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 51. No single planning document is more important in the life of a company than the a. income statement. b. cash budget. c. balance sheet. d. corporate charter. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 52. A simple listing of expected cash inflows and outflows provides the entrepreneur with a(n) a. income statement. Copyright Cengage Learning. Powered by Cognero.

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b. cash budget. c. pro forma balance sheet. d. net equity computation. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 53. Jake has prepared pro forma financial statements for his landscaping business. At the minimum, he should check results and make modifications a. annually. b. quarterly. c. monthly. d. weekly. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 54. Mark wants to make sure he does not run out of cash so he is preparing a monthly cash budget. After determining the percentage of cash collections by month, he should a. estimate the amount and timing of cash disbursements. b. calculate cash flow from operations. c. determine the end-of-month cash balance. d. determine the beginning-of-the-month cash balance. ANSWER: a POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 55. Mark follows the cash budget like it was carved in stone. He has fallen prey to the one real danger in overreliance on a cash budget which is a. inflexibility. b. pliability. c. exaggeration. d. errors. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 56. Entrepreneurs determine financial requirements based on a. predictions. b. suggestions. c. assumptions. d. projections. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Remember 8/29/2018 11:24 AM 12/17/2018 11:16 AM

57. Maria is projecting sales for her company for the upcoming year. To be financially effective, she a. can over-project for sales if she has done research. b. should develop realistic sales projections. c. would be better served by under-projecting sales so she won't be disappointed. d. should ignore projections until after one year of operations when she can realistically project. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 58. James is preparing his forecasts for the coming year. Which of the following kinds of scenarios should he prepare when forecasting and budgeting? a. Best- and worst-case scenarios b. Aggressive sales increases, conservative assumptions, and worst-case scenarios c. Moderate sales increases, break-even, and worst-case scenarios d. Most-likely, probably, and least-likely scenarios ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 59. Tony operates a computer retail business. Based on this industry, how often should sales projections be made for Tony's company? a. Monthly for year 1 and annually for years 2 and 3 Copyright Cengage Learning. Powered by Cognero.

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b. Annually for year 1 and quarterly for years 2 and 3 c. Monthly for year 1 and quarterly for years 2 and 3 d. Annually for year 1 and monthly for years 2 and 3 ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 60. Bowz 4 Kidz is a new business that Ellie has started out of her home utilizing an online business model. In developing pro forma financial statements, what general questions do the statements need to answer and how will they be applied to Ellie's business? ANSWER: The purpose of pro forma financial statements is to answer three questions: 1. How profitable can Ellie expect the firm to be, given the projected sales levels and the expected sales expenses relationships? 2. How much and what type of financing (debt or equity) will be needed to finance the firm's assets? 3. Will Bowz 4 Kidz have adequate cash flows? If so, how will they be used? If not, where will the additional cash come from? POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-1 The Purpose of Financial Forecasting QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.01 - LO: 11-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 1:24 PM 61. List and describe the five drivers of a firm's profits. ANSWER: To forecast profitability, an entrepreneur needs to know what will determine the five drivers of a firm's profits: 1. Amount of sales. The dollar amount equals the price of the product or service times Copyright Cengage Learning. Powered by Cognero.

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4. 5.

the number of units sold or the amount of service rendered. Cost of goods sold. Cost of goods sold is the cost of producing or purchasing the firm's products or services. These costs can either be fixed (those that do not vary with a change in sales volume) or variable (those that change proportionally with sales). Operating expenses. These expenses relate to marketing and distributing the product, general and administration expenses, and depreciation expenses. Like cost of goods sold, operating expenses can be fixed or variable in nature. Interest expense. An entrepreneur who borrows money agrees to pay interest on the loan principal. Taxes. A firm's income taxes are figured as a percentage of profits before taxes (also known as taxable income).

POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-2 Forecasting Profitability QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.02 - LO: 11-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 62. Briefly describe what a cash budget is and its importance to a small business. ANSWER: The cash budget is one of the primary tools that a small business owner can use to manage cash flows. The budget is concerned specifically with dollars both received and paid out during a relatively short time period, such as a week or a month. No single planning document is more important in the life of a small company, either for avoiding cash flow problems when cash runs short or for anticipating short-term investment opportunities if excess cash becomes available. POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.02 - LO: 11-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 63. Briefly describe working capital and net working capital. ANSWER: Working capital is a term used in the business world for current assets—namely, cash, accounts receivable, and inventory that are required in the day-to-day operations of the Copyright Cengage Learning. Powered by Cognero.

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business. The term is also sometimes used loosely to mean current assets less current liabilities, which is called net working capital. Net working capital is a measure of a company's liquidity. The greater a firm's net working capital, the greater its ability to pay on any debt commitment as it comes due. POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 64. Explain the percentage-of-sales technique. ANSWER: The key to effectively forecasting asset requirements is first to understand the relationship between a firm's projected sales and its assets. A firm's sales are the primary force driving future asset needs. The greater a firm's sales, the greater the asset requirements will be and, in turn, the greater the need for financing. Since asset needs increase as sales increase, a firm's asset requirements are often estimated as a percentage of sales. Therefore, if future sales have been projected, a ratio of assets to sales can be used to estimate asset requirements. This method of estimating asset requirements is called the percentage-of-sales technique. It can also be used to project figures for individual assets, such as accounts receivable and inventory. POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 65. What are the basic principles that govern the financing of firms? ANSWER: To forecast a company's financing needs effectively, a small business owner must understand certain basic principles that govern the financing of firms, which can be stated as follows: 1. The more assets a business needs, the greater its financing requirements. Thus, a firm that is experiencing rapid sales growth requires more assets and, consequently, faces greater pressure to find financing. 2. A company should finance its growth in such a way as to maintain adequate liquidity, which is the degree to which a firm has current assets available to meet maturing short-term Copyright Cengage Learning. Powered by Cognero.

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debt. 3. The amount of money that a firm can borrow is dependent in part on the amount of money the owners put into the business in the form of owners' equity. 4. Some types of short-term debt—specifically, accounts payable and accrued expenses— maintain a relatively constant relationship with sales. • •

As sales increase, more inventory will generally be required. If the inventory is purchased on credit, accounts payable will increase as well. As a result, accounts payable will track increases in sales. The same holds true for accrued expenses. More business means more expenses, some of which will be accrued as liabilities, rather than being paid immediately.

Given the "spontaneous" relationship of these types of liabilities with sales, they are sometimes referred to as spontaneous debt financing. While not the more formal type of debt, such as bank loans, these accrued liabilities can be a significantly large source of financing for many small companies. The remainder of debt financing must come from loans by banks and other lending sources. 5. For the typical small firm, retained earnings are the primary source of equity capital for financing growth. Retained earnings are profits that are retained within the company rather than being distributed to the owners. POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-3 Forecasting Asset and Financing Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 1:25 PM 66. What are the two ways in which cash flows can be forecasted? ANSWER: Projecting a company's cash flows can be accomplished in one of two ways: 1. The information from the pro forma financial statement and balance sheets can be used to develop a pro forma statement of cash flows. 2. A cash budget can be prepared (usually done on a monthly, quarterly, or annual basis). POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.03 - LO: 11-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

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67. Faye is developing a statement of cash flows for Yummy Gummies, a candy company that she owns. She has a net profit of $15,000 and an increase in inventory of $7,500. She took out a line of credit with her bank to finance her business and has decreased accounts receivable by $4,000. She has also invested in equipment for shaping her candy. How will the above information be listed on the statement of cash flows? ANSWER: • Cash flow from operating activities: Faye would include net profit and the increase in inventory in this section. She would also include the increase in accounts receivable and the depreciation on the candy-shaping equipment. • Cash flow from investing activities: Faye's purchase of the specialized candy equipment would be included in this section because it is an investment into an asset. • Cash flow from financing activities: Faye's cash generated from her bank loan would go into this section of the statement. POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-4 Forecasting Cash Flows QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 11:16 AM 68. Andrea is working on forecasting her financial statements for her consulting business. Discuss three suggestions for Andrea to make her forecasting more effective. ANSWER: Following are some possible suggestions for Andrea: 1. Develop realistic sales projections. Andrea should make sure her sales goals are attainable. 2. Consider different scenarios. Andrea should prepare at least three scenarios—one with an aggressive forecast for sales increases, another using more conservative assumptions, and a third with worst-case scenarios. 3. Build projections from clear assumptions about marketing and pricing plans. Andrea should not be vague, and she should not guess. She should spell out the kinds of marketing she plans to do—for example, state specifically how many customers she expects to attract. 4. Do not use unrealistic profit margins. Projections are immediately suspect if profit margins (profits ÷ sales) or expenses are significantly higher or lower than the average figures reported by firms in the industry with similar revenues and numbers of employees. In general, a new business should not expect to exceed the industry average in profit margins. 5. Do not limit her projections to an income statement. Investors are particularly Copyright Cengage Learning. Powered by Cognero.

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interested in the firm's cash flows. However, they also want to see assumptions about the sources and uses of capital needed to grow the business. 6. Provide monthly data for the upcoming year, quarterly data for the second year, and annual data for succeeding years. Andrea should prepare projections for a three- to five-year period using monthly for the first year, quarterly data for year 2 projections, and annual data for her projections after year 2. 7. Avoid providing too much financial information. Andrea should limit her projections to two cases: the most-likely (base) case and the break-even case. The base case should show what she realistically expects the business to do; the break-even case should show what level of sales is required to break even. 8. Be certain that the numbers reconcile—and not by simply plugging in a figure. Andrea should make sure the numbers match up with information. If they don't, she should not just simply plug a figure into equity to make things work out. 9. Avoid inflexibility. Once a budget has been prepared, a business owner must decide how to use it. Entrepreneurship is about seeking opportunities, and there is a real danger that a cash budget may lead to inflexibility. A strict cost-containment strategy in order to "make the budget" can discourage owners from being creative and shifting their approach when it makes sense to do so. 10. Communicate with suppliers. Budget preparation is a good time to scrutinize vendor relationships. Depending on the closeness of the relationship, Andrea might share her budget and the possible scenarios she might face with her suppliers to see whether they can handle each level of demand. 11. Don't forget that you have to live. Andrea should not disregard her personal finances. Particularly during the early stages of the business, Andrea may have to make some significant personal sacrifices and assume some personal risks. Even so, Andrea's personal living expenses have to be considered alongside the financing needs of the business, even if at a minimal level. Inadequate provision for her living expenses could lead to the temptation of diverting assets from the business for personal needs and a departure from the plan. POINTS: 1 DIFFICULTY: Hard REFERENCES: 11-5 Use Good Judgment When Forecasting QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.11.05 - LO: 11-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 1:32 PM Match the term with its definition. a. cash budget b. line of credit c. net working capital d. percentage-of-sales technique e. pro forma financial statements f. spontaneous debt financing Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: REFERENCES:

Easy 11-1 The Purpose of Financial Forecasting 11-3 Forecasting Asset and Financing Requirements 11-4 Forecasting Cash Flows QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.11.01 - LO: 11-1 SMAL.LONG.20.11.03 - LO: 11-3 SMAL.LONG.20.11.04 - LO: 11-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 1:38 PM 69. Statements that project a firm's financial performance and condition, including a firm's projected profits, assets and financing requirements, and cash flows ANSWER: e POINTS: 1 70. A short-term loan ANSWER: b POINTS: 1 71. Short-term debts, such as accounts payable, that automatically increase in proportion to a firm's sales ANSWER: f POINTS: 1 72. A listing of cash receipts and cash disbursements, usually for a relatively short time period, such as a week or a month ANSWER: a POINTS: 1 73. A method of forecasting asset requirements using a ratio of assets to sales ANSWER: d POINTS: 1 74. A measure of a company's liquidity, equal to current assets less current liabilities ANSWER: c POINTS: 1

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Chapter 12 - A Firm's Sources of Financing 1. Three basic characteristics determine how a firm is financed: the firm's economic potential, the size of the company, and the nature of its assets. a. True b. False ANSWER: False RATIONALE: The basic factors that determine how a firm is financed include all factors as well as the size and maturity of the firm. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 2. A firm with potential for large profits, as opposed to high growth potential, has many more possible sources of financing than does a firm that offers only unattractive returns. a. True b. False ANSWER: False RATIONALE: A firm with potential for large profits and high growth has many more possible sources of financing than does a firm that offers only unattractive returns. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 3. Most startup investors limit their investing to firms that offer potentially high returns within a one- to three-year period. a. True b. False ANSWER: False RATIONALE: Most startup investors limit their investing to firms that offer potentially high returns within a Copyright Cengage Learning. Powered by Cognero.

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five to ten year period. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 4. The age of a company has little impact on the types of financing available to it. a. True b. False ANSWER: False RATIONALE: The age of a company has a direct bearing on the types of financing available to it. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 5. Venture capitalists restrict their investment in startup companies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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6. Assets such as the quality of a firm's employees are considered tangible in nature and thus have substantial value as collateral. a. True b. False ANSWER: False RATIONALE: Assets such as goodwill, research and development, and even the quality of a firm's employees are considered intangible in nature and thus have little value as collateral. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 7. Goodwill is considered an intangible asset and is highly valued when securing a loan. a. True b. False ANSWER: False RATIONALE: While intangible assets such as goodwill are important to an investor, they have little value as collateral when it comes to getting a loan. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 8. For every firm, there is a "right" answer to the question of balancing debt and equity, and it is important that the small business owner find that balance. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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RATIONALE: There is no right or wrong answer when it comes to choosing between debt and equity. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 9. Borrowing money rather than issuing common stock typically increases the potential for higher rates of return to owners. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:23 AM 10. Debt financing as opposed to equity financing allows owners to retain voting control of the company. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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11. If a firm finances with equity rather than with debt, it will bear no interest expense and thus yield greater net profits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 12. Generally, as long as a firm's return on assets is greater than the cost of debt, the owners' return on equity investment will decrease as the firm uses more debt. a. True b. False ANSWER: False RATIONALE: As long as a firm's operating income return on its assets in greater than the cost of debt, the owners' return on equity investment will actually increase as the firm uses more debt. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 13. Use of debt financing increases potential returns when a company is performing well, but it also increases the possibility of lower—even negative—returns if the company does not attain its goals in a given year. a. True b. False ANSWER: True POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 14. Small business owners sometimes accept higher levels of debt because doing so permits them to retain all of the stock and full ownership. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 15. Business loans are the primary source of financing for startups. a. True b. False ANSWER: False RATIONALE: Most of of the financing for startups comes from personal savings, with the remainder coming from family, friends, or partners. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:24 AM 12/17/2018 2:44 PM

16. One potential problem with acquiring funds from friends and relatives is that they might feel they have the right to interfere in the management of the business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 17. The main advantage of using credit cards for financing is the relatively low interest rate compared to bank loans. a. True b. False ANSWER: False RATIONALE: Typically credit card financing has a higher interest rate than bank loans. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 18. Lines of credit are legal obligations to provide capital. a. True b. False ANSWER: False RATIONALE: Lines of credit are informal agreements to provide capital. POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 12-4 Bank Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 19. A chattel mortgage is a loan for which real property, such as land or a building, serves as collateral. a. True b. False ANSWER: False RATIONALE: This is a real estate mortgage. A chattel mortgage is secured by inventory or other movable property. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 20. The "five Cs of credit" are character, capacity, capital, conditions, and collateral. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-4 Bank Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM Copyright Cengage Learning. Powered by Cognero.

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21. Both wholesalers and equipment manufacturers/suppliers can be used as sources of funds. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 22. Companies that have business dealings with a new firm are possible sources of funds for financing inventory and equipment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 23. The amount of trade credit available to a new company depends on the supplier's confidence in the firm and not the type of business. a. True b. False ANSWER: False RATIONALE: The amount of trade credit available to a new company depends on both the type of business and the supplier’s confidence in the firm. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 24. Asset-based lending is a type of financing secured by assets such as equipment and inventory. a. True b. False ANSWER: False RATIONALE: Asset based lending is a line of credit secured by receivables, inventory, or both but not equipment. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 25. If a company has a signed purchase order from a creditworthy customer and the gross profit margin on the order is anticipated to be 36 percent, purchase-order financing is likely. a. True b. False ANSWER: True RATIONALE: Purchase-order financing typical requires at least a 35 percent gross profit margin on the signed purchase order. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:24 AM 12/17/2018 2:44 PM

26. For entrepreneurial ventures with the potential for becoming significant businesses, initial public offerings have been the fastest-growing source of financing over the past two decades. a. True b. False ANSWER: False RATIONALE: Private equity markets have been the fastest-growing source of financing. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 27. A source of early-stage capital financing for a company is financing from commercial banks. a. True b. False ANSWER: False RATIONALE: Early-stage capital financing is provided by business angels. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 28. Commercial investors are sometimes called business angels. a. True b. False ANSWER: False RATIONALE: This term refers to individual investors, not commercial investors. POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 29. A company that has more than 100 employees with locations in several states is typically the type of company in which business angels make an investment. a. True b. False ANSWER: False RATIONALE: Business angels generally make investments in local small companies (less than 20 employees) in industries they can provide knowledge. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 30. Around 5 percent of the business plans reviewed by venture capitalists are funded. a. True b. False ANSWER: False RATIONALE: No more than than 1or 2 percent of the business plans reviewed by venture capitalists are funded. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Remember 8/29/2018 11:24 AM 12/17/2018 2:44 PM

31. Small Business Administration loans include guaranty loans and loans directly from the SBA. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:24 AM 32. Qualified small businesses that cannot obtain business loans through normal lending channels can get loans directly from the SBA through its 7(a) Loan Guaranty Program. a. True b. False ANSWER: False RATIONALE: To obtain a guaranty loan, a small business must submit a loan application to a lender, such as a bank. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:25 AM 33. A small business that needs to purchase real estate could apply for a 7(a) guaranty loan. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:27 AM 34. State and local governments are becoming less involved in financing new businesses. a. True b. False ANSWER: False RATIONALE: Federal, state, and local governments have allocated increased amounts of money to finance new businesses. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:28 AM 35. Private placement is the selling of stock to select venture capitalists. a. True b. False ANSWER: False RATIONALE: Private placement is the selling of stock to select individuals. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:24 AM 12/17/2018 2:44 PM

36. The private sale of a firm's common stock is regulated by the Securities and Exchange Commission. a. True b. False ANSWER: False RATIONALE: Public sales are regulated by the SEC, not private. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 37. When a stock sale is restricted to private placement, an entrepreneur can avoid many of the demanding requirements of the securities laws. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 38. Common stock can be sold to underwriters, but they do not guarantee the sale of securities. a. True b. False ANSWER: False RATIONALE: Underwriters will guarantee the sale of securities for common stock sold to them. POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 39. Crowdfunding works strictly with individual donations made over the Internet. a. True b. False ANSWER: False RATIONALE: Crowdfunding can be in the form of donations, rewards, pre-purchase, or equity investing. POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-7 Crowdfunding QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.07 - LO: 12-7 NATIONAL STANDARDS: United States - BUS PROG: Ethics United States - BUSPROG: Communication TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 40. Anna's new business looks like it can grow quickly and become profitable in its first year. Anna will likely find _____ possible sources of financing than those with less potential for growth and profits. a. fewer b. about the same number of c. more d. many more ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Apply 8/29/2018 11:24 AM 12/17/2018 2:44 PM

41. Andrew is a venture capitalist who would like to find a good new business in which to invest. He's done this before so he has learned to limit his investing to firms with potentially high returns in a _____ period. a. 6- to 12-month b. 1- to 2-year c. 3- to 5-year d. 5- to 10-year ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 42. Ben left the corporate rat race to start his own business that will allow him to earn a small income while providing plenty of time to pursue his love of pottery making. He does not expect either growth or high profits. Ben's prospects for attracting outside financing are a. plentiful. b. limited. c. moderate. d. nonexistent. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 43. Amir left a large company to start his own firm. Which of the following is he more likely to rely on for financing in the early stages? Copyright Cengage Learning. Powered by Cognero.

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a. Bank loan b. IPO c. Retirement savings d. Bond sales ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 44. Phil is approaching a banker for some additional financing. Which of the following assets would be most important to the banker? a. Goodwill b. Inventory c. Current patents d. Business reputation ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 45. If he holds true to the average, before becoming president, Donald Trump likely invested approximately _____ of his investment in later-stage businesses. a. one-fourth b. one-half c. three-fourths d. nearly all ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 46. Cameron has applied for a loan to expand his young business. When bankers look for evidence of whether he will be able to repay a loan, they usually base their assessment on a. what Cameron's firm has done in the past. b. what Cameron says the firm will do in the future. c. the opinion of investment analysts. d. the business plan of the enterprise. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 47. Williams Alternative Power, Inc., a company developing solar panels, has done considerable research and limited production during its two-year life. It is about ready for its IPO. At this stage of its life cycle, its ability to attract venture capital is a. greater. b. lessened. c. optimal. d. limited. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 48. Carla is a loan analyst at the bank. When Cameron applied for a loan, Carla looked at his balance sheet for _____ to evaluate a possible loan for his company's financing. a. direct and indirect assets b. tangible and intangible assets c. assets founded upon past performance and those depending on future performance d. industry-specific and firm-specific assets ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 49. Williams Alternative Power, Inc. a company developing solar panels, is applying for a loan. The research the company has done for the manufacturing process would be a(n) _____ asset for the loan evaluation. a. collateral b. intangible c. revolving d. tangible ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM Copyright Cengage Learning. Powered by Cognero.

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50. Floyd's income statement for the current year showed operating profits of $45,000, and his balance sheet showed total assets of $300,000. His return on assets is _____ percent. a. 30 b. 15 c. 12 d. 6 ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 51. If a Eugenie finances her firm with equity rather than debt, her net profits could potentially be greater because a. equity financing almost always leads to better firm performance than debt financing. b. the terms of equity financing are more stable than the terms of debt financing. c. equity financing has a positive impact on asset selection. d. there is no interest expense. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 52. Elyse wants to calculate her return on equity but has forgotten the formula. You tell her that return on equity equals a. net profits divided by total owner's equity. b. total owner's equity divided by net profits. c. total assets divided by total owner's equity. d. total owner's equity divided by total assets. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 53. To determine how well her business is doing, Darlene should monitor the return on her investment (equity) because it is a better measure of performance than the a. return on assets ratio. b. current ratio. c. quick ratio. d. absolute dollar amount of net profits. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 54. David is trying to decide whether to add capital through investing more of his own money or through borrowing money from the bank. To help him decide, you remind him that as long as his firm's rate of return on assets is greater than the cost of the debt, his rate of return on equity will _____ as the firm uses more debt. a. decrease b. increase c. remain the same d. fluctuate ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 55. If the firm's rate of return on its assets is _____ than the cost of borrowing, then the owners' rate of return on equity will _____ as the firm uses _____ debt. a. less; decrease; less b. greater; decrease; more c. greater; increase; more d. less; increase; more ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 56. Aileen Lee is ranked among the world's top venture capitalists, but when she invests in a company, she cannot demand more than a. those who have invested debt in the enterprise. b. what is earned. c. anticipated future financing. d. established cash flows. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

12/17/2018 2:44 PM

57. Glenda is trying to decide between the use of debt and the use of equity to finance her young business. She should remember that a. her return on assets will be less if she uses debt financing. b. using other people's money to finance one's business is seldom a good idea. c. the lender will have partial control of the business. d. debt must be repaid even if the company does not make a profit. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 58. One factor that influences the choice between debt and equity is the a. state of the economy. b. risk of nationalization. c. degree of control the owners hope to retain. d. state of the owners' estate plan. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 59. It's been George's "baby" from the beginning, and he really doesn't want to be accountable to any outsider for the decisions he makes in his business. In George's case, he should seek initially to secure _____ financing. a. debt b. equity c. internal Copyright Cengage Learning. Powered by Cognero.

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d. asset ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 60. Maguire was considering selling stock as a source of funds but was concerned about a. damaging his corporate image. b. the loss of voting control of the company. c. the effect that might have on future financing. d. estate planning. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 61. Penelope is planning to launch her first business. She will most likely acquire her initial financing from a. venture capitalists. b. personal savings. c. wealthy individuals. d. the securities market. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 62. Although not the primary source of financing for most small business startups, another source of early financing can be a. family members. b. commercial banks. c. business suppliers. d. asset-based lenders. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 63. Family and friends provide almost _____ percent of startup capital beyond the entrepreneur's personal savings a. 25 b. 40 c. 60 d. 80 ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM Copyright Cengage Learning. Powered by Cognero.

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64. In the beginning, some entrepreneurs use _____ as a source of financing. a. asset-based lenders b. personal credit cards c. wealthy individuals d. venture capitalists ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 65. Which of the following financing sources has the greatest advantage of speed? a. Local bank b. Credit card c. Angel investor d. Venture capitalist ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 66. A line of credit is the _____ amount of credit a bank will provide a borrower at any one time. a. average b. annual c. maximum d. minimum ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 67. Florence wants to obtain a loan for a large color laser printer for her copy shop. Because the printer will last approximately eight years, the ideal loan would be a(n) _____ loan. a. mortgage b. trade credit c. asset-based d. term ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 68. Small firms frequently run into problems when they a. offer equipment as collateral for a term loan. b. underutilize the equipment purchased with the loan. c. overestimate the cash inflows from the equipment purchased with the loan. d. fail to match a term loan's payment terms with the expected cash inflows from the equipment purchased with the loan. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom’s: Remember 8/29/2018 11:24 AM 12/17/2018 2:44 PM

69. Granville owns a construction company and would like to purchase a mobile construction office. The bank would likely offer him a _____ mortgage. a. chattel b. real estate c. revolving d. term ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 70. If Joan is applying for a loan for a shelving system to improve her retail sales where the system will serve as collateral, which of the following types of loan would be the most appropriate? a. Chattel mortgage b. Line of credit c. Real estate mortgage d. Term loan ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM Copyright Cengage Learning. Powered by Cognero.

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71. In his presentation to the banker when he applies for a business loan to purchase additional equipment, Alan should emphasize a. how much profit the new equipment will generate. b. how he will be able to repay the principal of the loan. c. how energy-efficient the new equipment is. d. how much income he will generate for the bank. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 72. When considering a loan application, which of the five Cs is vital even if not sufficient alone to secure a loan? a. Capacity b. Capital c. Character d. Collateral ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 73. Joann is buying an existing convenience store. Her best choice for a bank would be a. a national bank that processes credit card payments. b. the credit union where she is already a member. c. a bank close to her store. d. the largest bank in her town, which is located on the other side of town from her store. ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Hard REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 74. LIBOR is _____ the prime rate. a. approximately equal to b. considerably higher than c. considerably lower than d. a lagging indicator of ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 75. In addition to the interest rate on his business loan, Paul should also give attention to the a. maturity date. b. reserve requirement. c. tax liability of the loan. d. LIBOR on the day the loan is approved. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Apply 8/29/2018 11:24 AM 12/17/2018 2:44 PM

76. A balloon payment a. is an upfront payment to obtain a loan. b. may be required by the bank at about halfway through the loan term. c. may be due at any time during the term of a loan. d. is used to lift (remove) a loan covenant. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 77. A loan covenant is very likely to require a. a bank officer on the board of advisors. b. salary limitations. c. voting rights. d. a fixed business strategy. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 78. Even though Evan's company is a corporation, the bank imposed a loan covenant that required Evan to a. make a balloon payment after three years. b. pay a loan origination fee. c. make quarterly rather than monthly payments. Copyright Cengage Learning. Powered by Cognero.

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d. personally guarantee the loan. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-4 Bank Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 79. A source of short-term funds for many small companies with inventories is a. trade credit. b. long-term bank loans. c. mortgages. d. asset-based notes. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 80. Instead of borrowing money from suppliers to purchase equipment, an increasing number of small businesses are a. obtaining trade credit instead. b. making these purchases outright. c. choosing to lease the equipment. d. opting to streamline assembly processes to reduce expenditures. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 81. Galen runs a Greek restaurant and is currently considering leasing or purchasing some updated equipment. Which of the following statements is correct? a. If the equipment he is buying will become outdated in two years, leasing would be a better option than purchasing. b. Because the restaurant is new and he wants to protect his cash flow, purchasing would be better since purchasing costs less than leasing. c. If the equipment is leased, the restaurant's lines of credit will be increased. d. Leasing is always more expensive than purchasing over the term of the lease. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 82. Irwin has applied for a loan from an asset-based lending company. As security, he will offer a. land and buildings. b. accounts receivable and inventory. c. equipment and buildings. d. inventory and equipment. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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83. Harlan's customers have been a little slow in paying their invoices, and he is short on cash to pay his quarterly taxes. Harlan should consider a. sending the late payers to a collection agency. b. factoring. c. putting his late payers on credit hold until they pay up. d. taking out a personal loan to pay the taxes. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 84. Ralph owns a lumber yard and has a $500,000 purchase order from a construction company. His cost of goods sold for this order is $300,000. Because his company needs working capital, the most logical loan for the lumber yard would be to use a. an equipment-based loan. b. factoring. c. purchase-order financing. d. asset-based financing. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 85. The type of financing Evangeline received from a business angel is known as a. formal venture capital. Copyright Cengage Learning. Powered by Cognero.

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b. informal venture capital. c. a formal business loan. d. an informal investment. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 86. Sondra is a business angel who is looking for a startup company in which to invest. Which of the following companies would she most likely invest in based on current research? a. A company that currently has fewer than 20 employees and has plans to grow b. A business out of her home state to diversify her risk c. A business in an industry in which she has no experience d. A company formed by a group of experts in the industry ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 87. Business angels, as opposed to venture capitalists, provide a. asset-based loans. b. factoring. c. informal venture capital. d. trade credit. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 88. Will has decided to invest $10,000 into his neighbor's new company. The money will be used in the early stages of development. Will is considered a a. venture capitalist. b. business angel. c. business contributor. d. loan specialist. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 89. Isaac is looking for a business angel. The traditional way of finding one is through a. contact with business associates, accountants and lawyers. b. his banker. c. advertisements in magazines. d. contact with friends and relatives. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply Copyright Cengage Learning. Powered by Cognero.

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90. Business angels provide what percentage of all outside equity capital? a. 10 percent b. 50 percent c. 90 percent d. Business angels only provide loans, not equity. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 1/3/2019 5:16 AM 91. Which of the following investors are generally more "friendly" but also can be very demanding? a. Venture capitalists b. Family members c. Banks d. Business angels ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 92. Venture capital firms a. are often limited partnerships that raise capital from other investors. b. provide for the financing needs of large companies only. c. are corporations or partnerships that operate as liquidation groups. d. no longer operate in the U.S. market. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 93. Chuck, Marie, and Tommy are a group of friends who have formed a limited partnership to raise capital for an investment in 20 franchises of Rigby's, a new sports bar concept. Tommy will be the general partner; Chuck and Marie will be limited partners. These three are a. business angels. b. formal venture capitalists. c. creditors. d. informal venture capitalists. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 94. Miracle Fund is a venture capitalist. In exchange for providing venture capital, Miracle Fund a. expects the entrepreneur to pay interest to the fund. b. receives the right to own a percentage of the entrepreneur's business. c. takes a percentage of the annual earnings. d. becomes a general partner of the entrepreneur. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 95. Many venture capitalists a. prefer common stock in exchange for their investment. b. manage the liquidation of failed ventures. c. intend to cash out after five to seven years. d. insist on voting rights during stockholder meetings. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 96. The federal government primarily provides funds to small businesses through a. venture capital companies. b. the Small Business Administration. c. business angels. d. the Securities and Exchange Commission. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM Copyright Cengage Learning. Powered by Cognero.

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97. Guaranty loans are a. made by private lenders. b. guaranteed up to 50 percent by the SBA. c. made through foreign banks. d. limited to $100,000. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 98. Sandy is using a government program to help finance her new business. Her company is not eligible for a loan through a normal lending channel and is receiving $120,000 with the SBA guaranteeing 85 percent of the loan. She also had to submit a loan application to the lender. Sandy is participating in the a. 7(a) Loan Guaranty Program. b. Certified Development Company 504 Loan Program. c. Small Business Innovative Research Program. d. 7(m) Microloan Program. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 99. Martina wants to expand her business. She will need to buy a larger facility and equip it with additional machinery. She should look into the SBA loan program that provides long-term financing for small businesses to acquire real estate or machinery and equipment called the a. 7(m) Microloan Program. b. 7(a) Loan Guaranty Program. c. Certified Development Company 504 Loan Program. Copyright Cengage Learning. Powered by Cognero.

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d. Small Business Investment Program. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 100. Novelty Shirts is a manufacturing company that needs to expand its production facilities. Which of the following SBA programs would be best to acquire real estate valued at $150,000? a. 7(a) Loan Guaranty b. Certified Development Company 504 Loan c. 7(m) Microloan d. Small Business Innovative Research ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 101. Elena plans to open a nonprofit child-care center in her depressed neighborhood. She may qualify for an SBA loan program that provides loans of up to $50,000 known as the a. 7(a) Loan Guaranty Program. b. 7(m) Microloan Program. c. Certified Development Company 504 Loan Program. d. Small Business Investment Program. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 102. Small business investment companies (SBICs) a. are licensed and regulated by the Federal Trade Commission. b. may provide long-term loans or equity capital. c. obtain part of their capital from local governments at attractive interest rates. d. provide only short-term financing. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 103. Lyman's business has grown to 400 employees with annual revenues of $15 million. He would like to expand further but needs another $5 million. He should consider a. a 7(a) guaranty loan. b. a CDC 504 loan. c. the SBIR program. d. an SBIC loan. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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104. Barry needs financing to start his inner-city venture. His goal is to provide part-time employment for at-risk youths to keep them off the streets and engaged in learning marketable skills. Barry may find some assistance from a. a community-based financial institution. b. the Small Business Innovative Research Program. c. a small business investment company. d. a venture capital firm. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 105. Connie owns a small but growing company that produces gorilla glass for smartphones. One possible source of funding might be a. Dell, a well-known PC manufacturer. b. Intel, a producer of computer chips. c. Microsoft, a company that markets software applications. d. Samsung, a company that sells smartphones. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 106. Private placement a. is the sale of capital stock to selected individuals. b. is the sale of capital stock to investment bankers. c. requires compliance with all securities laws. Copyright Cengage Learning. Powered by Cognero.

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d. maintains the ownership control of the original owners. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 107. Nancy has decided to raise working capital for her upscale boutique business which currently has four locations and is considering franchising the concept in the next few years. Because of the company's current organization and anticipated future plans, the most likely form of financing would be a. large corporations. b. private placement. c. public sale. d. underwriting. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 108. A drawback to "going public" is a. large profit potential resulting in increased taxation. b. numerous SEC requirements. c. national recognition causing increased exposure. d. additional working capital. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 109. Fans set up a crowdfunding account to produce new, not-for-profit episodes of Star Trek based on the original series. This type of crowdfunding uses the _____ approach. a. donations b. rewards c. pre-purchases d. equity investing ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-7 Crowdfunding QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.07 - LO: 12-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 110. Which of the following types of crowdfunding is subject to securities laws? a. Donations b. Rewards c. Pre-purchases d. Equity investing ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 12-7 Crowdfunding QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.07 - LO: 12-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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111. What are the four basic characteristics that determine how a firm is financed? ANSWER: Four basic characteristics of a business significantly affect how it is financed: 1. 2. 3. 4.

The firm's economic potential. The size and maturity of the company. The nature of its assets. The owner's personal preferences with respect to using debt or equity.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 112. How does company size and maturity affect access to financing? ANSWER: Larger and older firms have access to bank credit that may not be available to younger and smaller companies. Also, smaller firms tend to rely more on personal loans and credit cards for financing. In the early years of a business, most entrepreneurs bootstrap their financing— that is, they depend on their own initiative to come up with the necessary capital. Only after the business has an established track record will most bankers and other financial institutions be willing to provide financing. In addition, venture capitalists limit how much they will invest in startup companies. Many such investors believe the additional risk associated with startups is too great relative to the returns they can expect to receive. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-1 Firm Characteristics and Sources of Financing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.01 - LO: 12-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 113. What are the tradeoffs between profitability, risk, and control that should be considered when choosing between debt and equity? ANSWER: The choice between debt and equity financing involves trade-offs regarding potential profitability, financial risk, and voting control. Borrowing money (debt) rather than issuing Copyright Cengage Learning. Powered by Cognero.

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common stock (owners' equity) creates the potential for higher rates of return to the owners and allows them to retain voting control of the company, but it also exposes them to greater financial risk. Issuing common stock rather than borrowing money results in lower potential rates of return to the owners and the loss of some voting control, but it does reduce their financial risk. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 114. Luke has a new company and is considering equity financing. Currently, Luke is the only owner and source of equity for the business and makes all executive decisions for daily operations. What effect could the addition of other investors have? ANSWER: The addition of investors will have financial and voting effects on the company's operations. Financial effects include how monies would be divided if the company is profitable, meaning Luke would have to share these profits. If the company is not profitable, an equity investor cannot demand more than what is earned in profits. Voting control changes with equity financing result in Luke giving up some control. Because many owners of small firms resist giving up control to outsiders, Luke must decide if he can accept this trade-off for the additional money to operate the business. Because financing with debt has issues as well, Luke should decide if the risk is worth not having as much control of the company. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-2 Choosing Between Debt and Equity QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.02 - LO: 12-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 115. What are three different sources of financing for smaller companies? What advantages and disadvantages do each present? ANSWER: When financing a small business, an owner almost always relies first on personal savings, followed by investments by family and friends, and maybe a credit card or two. Personal savings is by far the most common source of equity used to finance a small business. Both lenders and investors are unlikely to loan money or invest in the business if Copyright Cengage Learning. Powered by Cognero.

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the owner does not have his or her own money at risk. Also, in the early years, a firm can ill afford large fixed loan payments for debt repayment. Friends and family provide almost 80 percent of startup capital beyond the entrepreneur's personal savings. Loans from friends and family can often be obtained quickly, because they are based more on personal relationships rather than financial analyses. However, borrowing from friends and family should be thought of a high-risk source of money due to the potential of putting personal relationships at risk. To minimize the chance of damaging important personal relationships, the entrepreneur should plan to repay such loans as soon as possible. In addition, any agreements should be put in writing. For someone who cannot acquire traditional financing like a bank loan, credit card financing may be an option. Credit cards have the advantage of speed. A lender at a bank must be convinced of the merits of the business opportunity, and that involves extensive preparation on the part of the entrepreneur. Credit card financing, on the other hand, requires no justification for the use of the money. However, the interest costs can become overwhelming over time, especially because of the tendency to borrow beyond the ability to repay. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-3 Sources of Small Business Financing: The Starting Point QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.03 - LO: 12-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:30 AM 116. Briefly describe the three types of business loans made by banks. ANSWER: Banks primarily make business loans in one of three forms:

1. Lines of credit. 2. Term loans. 3. Mortgages. A line of credit is an informal agreement or understanding between a borrower and a bank as to the maximum amount of funds the bank will provide the borrower at any one time. Under this type of agreement, the bank has no legal obligation to provide the capital. Under certain circumstances, banks will loan money on a 5- to 10-year term. Such term loans are generally used to finance equipment with a useful life corresponding to the loan's term. Since the economic benefits of investing in such equipment extend beyond a single year, banks can be persuaded to lend on terms that more closely match the cash flows to be received from the investment. Some loans call for term payments that include principal and interest, and others for interest only with lump sum principal reductions. Mortgages, which represent a long-term source of debt capital, can be one of two types: chattel mortgages and real estate mortgages. A chattel mortgage is a loan for which certain items of inventory or other movable property serve as collateral. The borrower retains title to Copyright Cengage Learning. Powered by Cognero.

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the inventory but cannot sell it without the banker's consent. A real estate mortgage is a loan for which real property, such as land or a building provides the collateral. Typically, these mortgages extend up to 25 to 30 years. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-4 Bank Financing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 12:17 PM 117. List the "five Cs of credit." ANSWER: In making a loan decision, bankers give serious consideration to what they call the "five Cs of credit": 1. 2. 3. 4. 5.

The borrower's character. The borrower's capacity to repay the loan. The capital being invested in the venture by the borrower. The collateral available to secure the loan. The conditions of the industry and economy.

Interest rate. The interest rate charged by banks to small companies is usually stated in terms of the prime rate or, occasionally, the LIBOR. The prime rate, or base rate, is the rate of interest charged by banks on loans to their most creditworthy customers. The LIBOR (London Interbank Offered Rate) is the interest rate that London-based banks charge other banks in London, which is considerably lower than the prime rate. The interest rate can be a floating rate that varies over the loan's life—that is, as

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the prime rate changes, the interest rate on the loan changes—or it can be fixed for the duration of the loan. A banker may also impose a floor on the interest rate so that it cannot go below a given rate. If a banker does impose a floor, you might request a ceiling that the rate cannot go above. Loan maturity date. A loan's term should coincide with the use of the money—shortterm needs require short-term financing, while long-term needs demand long-term financing. Repayment schedule. With a term loan, the loan is set to be repaid over 5 to 10 years, depending on the type of assets used for collateral. However, the banker may have the option of imposing a balloon payment before the loan is fully repaid. A balloon payment allows the bank to require the borrower to pay off the balance of the loan in full at a specified time, rather than waiting the full term for the loan to be repaid. Loan covenants. These restrictions require certain activities (positive covenants) and limit other activities (negative covenants) of the borrower to increase the chance that the borrower will be able to repay the loan.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-4 Bank Financing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 119. Describe four different loan covenants that a bank may impose on a loan ANSWER: Some types of loan covenants that a borrower might encounter include the following: 1. The company must provide financial statements to the bank monthly or, at the very least, quarterly. 2. To restrict a firm's management from siphoning cash out of the business, the bank may limit managers' salaries. It also may prohibit any personal loans from the business to the owners. 3. A bank may put limits on various financial ratios to make certain that a firm can handle its loan payments. For example, to ensure sufficient liquidity, the bank may require the firm's current assets to be at least twice its current liabilities—that is, the current ratio (current assets ÷ current liabilities) must be equal to or greater than 2. 4. The borrower will normally be required to personally guarantee the firm's loan. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-4 Bank Financing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom’s: Analyze 8/29/2018 11:24 AM 12/17/2018 2:44 PM

120. List three reasons why a business would lease as opposed to purchase equipment. ANSWER: Three reasons are commonly given for the popularity of leasing: 1. The firm's cash remains free for other purposes. 2. Available lines of credit can be used for other purposes. 3. Leasing provides a hedge against equipment obsolescence. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 121. Violet's Catering is growing rapidly. A new customer has requested the company cater a retirement luncheon for 500 people, resulting in Violet's Catering needing a large order from the company's primary food vendor. Although the company is experiencing growth, cash flow is a concern. What would be the best financing option? ANSWER: Violet's Catering needs to determine if purchase-order financing is feasible. With purchaseorder financing, the lender would advance the amount of the company's cost of goods sold less a fee, typically between 3 and 8 percent. As long as the gross profit margin is at least 35 percent, Violet's Catering might be able to obtain financing for the entire process. The fee is somewhat large, but it is worth being able to accept an order from a large customer. For Violet's Catering, the new customer is also a potential repeat customer. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM Copyright Cengage Learning. Powered by Cognero.

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122. Describe the two categories of private equity investors who offer financing to small businesses. ANSWER: Business angels are private individuals, generally with substantial business experience, who invest in early-stage ventures. Formal venture capitalists are groups of individuals who form limited partnerships for raising capital from large institutional investors. The money is then invested in high-potential startups and existing firms for an ownership share. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-6 Private Equity Investors QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 123. Allie is starting a purse business and is considering using a crowdfunding portal to raise money for her small business. In order to do so, what requirements must be met by Allie? What potential problems with crowdfunding should she be aware of before she undertakes such an endeavor? ANSWER: The Securities and Exchange Commission (SEC) has requirements that must be met by companies wanting to raise money on a crowdfunding portal: • •

Companies may not offer crowdfunding investments directly to investors—they must use a broker-dealer or funding portal. The broker-dealer or funding portal—a crowdfunding intermediary—must be registered with the SEC and be a member of the Financial Industry Regulatory Authority (FINRA).

Small businesses that raise equity through crowdfunding should also be aware of potential problems. First, if crowdfunding investors receive voting rights, that fact may act as a deterrent to raising money from business angels and venture capitalists in the future. Such investors usually would not be interested in sharing voting rights with a large group of small investors. Second, Allie should be very cautious when sharing detailed financial information and trade secrets with a multitude of crowdfunding investors. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-7 Crowdfunding QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.07 - LO: 12-7 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

12/17/2018 2:44 PM

124. Marla runs a not-for-profit daycare center in her home located in a rural area. She is in need of $10,000 to purchase inventory, supplies, and equipment. What Small Business Administration program would be the best fit for Marla's situation and why? ANSWER: The 7(m) Microloan Program would be the best for Marla's business. It grants short-term loans up to $50,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, and machinery and equipment. The SBA makes or guarantees a loan to an intermediary, which in turn makes the microloan to the applicant. As an added benefit, the lender provides training and support programs to its microloan borrowers. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 125. Gina owns a clothing resale store in a low-income neighborhood. Since opening, the store has hired five employees and is making a small profit. The store is the only business in her area and often sponsors fundraisers at the location. Because the store is in need of expansion capital, what type of funding should Gina seek and why? ANSWER: A community-based financial institution would be best since these lenders serve low-income communities and receive funds from federal, state, and private sources. Capital is provided to businesses that have trouble attracting outside investors but have potential to make modest profits, serve the community, and create jobs. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-8 Government Loan Programs QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 126. Discuss two methods of selling stock. ANSWER: One way to sell common stock is through a private placement, in which the firm's stock is sold to selected individuals—usually the firm's employees, the owner's acquaintances, members of the local community, customers, and suppliers. Copyright Cengage Learning. Powered by Cognero.

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Some small firms make their stock available to the general public in what is called an initial public offering (IPO). The reason often cited for a public sale is the need for additional capital to grow the business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-9 Additional Sources of Financing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 127. Janice loves to cook and go backpacking, and she had an idea for a backpacking cookbook that would combine ultralight ingredients into interesting and appetizing meals. However, she needs the money to research and test the recipes as well as cover printing and marketing expenses. How could Janice use the different crowdfunding options—donations, rewards, pre-purchase, or equity investing—to finance her cookbook? ANSWER: Janice could set up an account and solicit donations. If she has few funds to begin with, this would be cheapest option. She could offer free recipes or food packing tips as a reward option. She could also offer the final cookbook under the pre-purchase arrangement. Under the equity-based option, she would be subject to securities laws, which would likely be too difficult for a cookbook. POINTS: 1 DIFFICULTY: Hard REFERENCES: 12-7 Crowdfunding QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.12.07 - LO: 12-7 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM Match the definition with its term. a. 7(a) Loan Guaranty Program b. 7(m) Microloan Program c. Certified Development Company (CDC) 504 Loan Program d. community-based financial institution e. formal venture capitalists f. informal venture capital g. loan covenants h. Small Business Innovative Research (SBIR) Program Copyright Cengage Learning. Powered by Cognero.

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i. small business investment companies (SBICs) DIFFICULTY: Easy REFERENCES: 12-6 Private Equity Investors 12-8 Government Loan Programs QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.06 - LO: 12-6 SMAL.LONG.20.12.08 - LO: 12-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 2:44 PM 128. A lender that uses funds from federal, state, and private sources to provide financing to small businesses in lowincome communities ANSWER: d POINTS: 1 129. A loan program that helps small companies obtain financing through a guaranty provided by the SBA ANSWER: a POINTS: 1 130. An SBA program that helps to finance companies that plan to transform laboratory research into marketable products ANSWER: h POINTS: 1 131. Individuals who form limited partnerships for the purpose of raising venture capital from large institutional investors ANSWER: e POINTS: 1 132. Privately owned banks, regulated by the SBA, that provide long-term loans and/or equity capital to small businesses ANSWER: i POINTS: 1 133. An SBA loan program that provides long-term financing for small businesses to acquire real estate or machinery and equipment ANSWER: c POINTS: 1 134. Funds provided by wealthy private individuals to high-risk ventures ANSWER: f POINTS: 1 135. An SBA program that provides short-term loans of up to $50,000 to small businesses and not-for-profit child-care centers ANSWER: b POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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Match the term with its definition. a. asset-based loan b. basis point c. equipment loan d. LIBOR (London InterBank Offered Rate) e. line of credit f. prime rate (base rate) g. purchase-order financing h. term loan DIFFICULTY: Easy REFERENCES: 12-4 Bank Financing 12-5 Business Suppliers and Asset-Based Lenders QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 SMAL.LONG.20.12.05 - LO: 12-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:52 AM 136. An informal agreement between a borrower and a bank as to the maximum amount of funds the bank will provide at any one time ANSWER: e POINTS: 1 137. Money loaned for a 5- to 10-year term, corresponding to the length of time the investment will bring in profits ANSWER: h POINTS: 1 138. An installment loan from a seller of machinery used by a business ANSWER: c POINTS: 1 139. 1/100th of 1 percent when quoting an interest rate ANSWER: b POINTS: 1 140. Obtaining cash from a lender who, for a fee, advances the amount of the borrower's cost of goods sold for a specific customer order ANSWER: g POINTS: 1 141. The interest rate charged by commercial banks on loans to their most creditworthy customers ANSWER: f Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 142. A line of credit secured by working capital assets ANSWER: a POINTS: 1 Match the term with its definition. a. balloon payment b. business angels c. chattel mortgage d. crowdfunding e. factoring f. initial public offering (IPO) g. private placement h. real estate mortgage DIFFICULTY: Easy REFERENCES: 12-4 Bank Financing 12-5 Business Suppliers and Asset-Based Lenders 12-6 Private Equity Investors 12-7 Crowdfunding 12-9 Additional Sources of Financing QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.12.04 - LO: 12-4 SMAL.LONG.20.12.05 - LO: 12-5 SMAL.LONG.20.12.06 - LO: 12-6 SMAL.LONG.20.12.07 - LO: 12-7 SMAL.LONG.20.12.09 - LO: 12-9 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/19/2018 11:55 AM 143. Private individuals who invest in others' entrepreneurial ventures ANSWER: b POINTS: 1 144. A long-term loan with real property held as collateral ANSWER: h POINTS: 1 145. A very large payment required about halfway through the term over which payments were calculated, repaying the loan balance in full ANSWER: a POINTS: 1 146. The issuance of stock to be traded in public financial markets Copyright Cengage Learning. Powered by Cognero.

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ANSWER: f POINTS: 1 147. The sale of a firm's capital stock to select individuals ANSWER: g POINTS: 1 148. A loan for which items of inventory or other movable property serve as collateral ANSWER: c POINTS: 1 149. The process of raising small amounts of money from a large number of investors via the Internet ANSWER: d POINTS: 1

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Chapter 13 - Planning for the Harvest 1. Harvesting is the method entrepreneurs and investors use to grow their firms. a. True b. False ANSWER: False RATIONALE: Harvesting is the method entrepreneurs and investors use to exit a business and, hopefully, reap the value of their investment in the firm. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 2. Many entrepreneurs successfully grow their firms but fail to develop effective harvest plans. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 3. Investors in a startup company are mainly interested in the new firm's growth and are not particularly interested in an exit plan. a. True b. False ANSWER: False RATIONALE: The harvest (exit plan) is vitally important to investors. POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 4. The harvesting process encompasses more than just selling and leaving a business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 5. The sale of a firm is solely about determining the value of a company. a. True b. False ANSWER: False RATIONALE: The sale of a firm is concerned with not only how to value a company, but also how to structure the payment overlaid with the entrepreneur’s motivation for selling the company. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM Copyright Cengage Learning. Powered by Cognero.

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6. A financial buyer of a small business is most interested in the firm as a stand-alone, cash-generating business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 7. A strategic buyer is most interested in the stand-alone, cash-generating potential of a business. a. True b. False ANSWER: False RATIONALE: A strategic buyer is most interested in the synergies that can be achieved via an acquisition. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 8. More recently, the bust-up leveraged buyout has been replaced by the build-up leveraged buyout. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 9. The build-up leveraged buyout is typically used in industries that are dominated by large firms. a. True b. False ANSWER: False RATIONALE: The build-up leveraged buyout is typically used in industries that are dominated by small business, such as funeral services and automobile dealerships. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 10. A management buyout can contribute significantly to a firm's operating performance by increasing management's focus and intensity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 11. Although advocates maintain that employee ownership improves motivation, the value of increased employee effort resulting from improved motivation varies significantly from firm to firm. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 12. Employee education is necessary if an ESOP is to be effective. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 13. For value-creating firms, owners who decide to harvest by withdrawing cash flows should accelerate the process as much as possible for a company with growth needs. a. True b. False ANSWER: False RATIONALE: Since a value-creating firm is earning attractive rates of return for its investors, this option would be incorrect since the firm's rate of return exceeds the investors' opportunity cost of funds. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 14. One of the drawbacks of harvesting by withdrawing cash flows slowly is that the owner must seek out a buyer for the eventual sale of the business. a. True b. False ANSWER: False RATIONALE: Not having to seek out a buyer for the business is one of the advantages of harvesting via free cash flow withdrawal as well as still retaining control. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 15. For the entrepreneur who is simply tired of the day-to-day operations of the business, siphoning off the cash flows over time may require too much patience. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 16. Fewer dollars were raised for IPOs from 2008 to 2009, at the height of the Great Recession, and the average size of IPOs has decreased significantly over the past years, signifying that offerings by smaller firms are more prevalent. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: RATIONALE:

False The number of IPOs dropped dramatically following the dot.com bubble, and so did the total dollar amount raised by the offerings. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 17. With a private equity recapitalization, the firm's equity is sold in public equity markets, but the transaction is handled by a private investment banker. a. True b. False ANSWER: False RATIONALE: With a private equity placement, private equity capital is infused to help a family-controlled firm transfer ownership from one generation to the next and eventually to outside investors, while at the same time providing growth capital. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 18. A private equity recapitalization can be more flexible in structure to meet an entrepreneur's needs even though the entrepreneur cannot sell stock immediately. a. True b. False ANSWER: False RATIONALE: A private placement sale is more flexible in structure as well as allowing the entrepreneur to sell stock immediately. POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 19. Opportunity cost of funds is the rate of return that an investor can earn on another investment of similar risk. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 20. Owing to the formulas for determining the price of a private company, business valuation has become an exact science. a. True b. False ANSWER: False RATIONALE: Business valuation is part science and part art—there is no precise formula for determining the price of a private company. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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21. Harvesting owners can be paid in cash or in the stock of the acquiring firm, with stock generally being preferred over cash. a. True b. False ANSWER: False RATIONALE: Harvesting owners can be paid in cash or in stock of the acquiring firm, with cash generally being preferred over stock. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 22. Entrepreneurs who accept stock in payment for the sale of their businesses are usually pleased with the results because they escape a significant tax burden. a. True b. False ANSWER: False RATIONALE: Entrepreneurs who accept stock in payment for the sale of their businesses do avoid some unfavorable tax consequences, but overall they are frequently disappointed with the outcome. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 23. Entrepreneurs frequently do not appreciate the difficulty of harvesting a company. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 24. An entrepreneur can cash out immediately after the completion of an initial public offering (IPO). a. True b. False ANSWER: False RATIONALE: Entrepreneurs need to have a similar mind-set as investors, especially when they are planning an IPO. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 25. The opportunity to exit a business is always triggered by an interested seller. a. True b. False ANSWER: False RATIONALE: The opportunity to exit a business is triggered by the availability of a willing and interested buyer, not just an interested seller. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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26. Entrepreneurs should think very carefully about their motives for exiting a business and what they plan to do after the harvest. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 27. Entrepreneurs often do not make good employees at their former company. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 28. Many entrepreneurs, grateful for their past success, feel the need to give something back to society after selling their company. a. True b. False ANSWER: True POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 29. The harvesting of a business should cause the entrepreneur to ask for advice from the experts who helped build the company. a. True b. False ANSWER: False RATIONALE: These experts may not be the best ones to use since they may not experience in selling firms. POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 30. Jacob has worked for the past five years to build his business but wants to travel more, so he is thinking it is time to harvest. Harvesting refers to a. starting a business. b. managing the growth of a business. c. exiting a business. d. diversifying a business. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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31. As Jacob considers exiting or harvesting, he is concerned with which of the following? a. Merely selling and leaving a business b. The creation of future options c. The establishment of a benchmark for firm risk d. Capturing future profitability ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:15 PM 32. The availability of a company's harvest options is an important determinant of the firm's appeal to a. suppliers. b. investors. c. employees. d. management. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 33. Which of the following is one of the big financial questions associated with selling a business? a. To whom should I sell the business? b. How much should I ask for the business? Copyright Cengage Learning. Powered by Cognero.

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c. Should I offer the business to my employees? d. Would it be better to liquidate the assets? ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 34. Julie is looking to sell her flower shop. She should hire a(n) _____ to help her find a buyer and negotiate the sale. a. stock broker b. investment broker c. real estate broker d. business broker ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 35. Strategic buyers evaluate acquisition candidates according to the a. stand-along, cash-generating potential of a target business. b. synergies the buyer thinks the target business will create. c. potential of the target business to preserve employment. d. quality of the business strategy of the target firm. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 36. Sylvia, the owner of a clothing boutique, has agreed to sell her business to one of her buyers. This transaction would likely be described as a sale to a(n) _____ buyer. a. competing b. employee c. financial d. strategic ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/21/2018 11:41 AM 37. As a financial buyer, Ted is likely to evaluate acquisition candidates according to a. their stand-alone, cash-generating potential. b. synergies he thinks they will create. c. their potential to preserve employment. d. the level of debt they have accumulated. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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38. A potential buyer for Teresa's business has mentioned a leveraged buyout, which involves a high level of _____ financing. a. debt b. equity c. strategic d. unsecured ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 39. In earlier years, leveraged buyouts became synonymous with the _____ LBO. a. bust-up b. build-up c. owner-financed d. publicly funded ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 40. A build-up leveraged buyout involves a. developing the business to make it an attractive takeover target. b. acquiring businesses that occupy a higher level in the market channel. c. a longer time horizon than a bust-up leveraged buyout. d. constructing a larger enterprise to be taken public via an IPO. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 41. Marvin is planning to sell his company to his management team. Marvin will be financing part of the purchase. This type of arrangement is a form of a. ESOP. b. IPO. c. PPO. d. LBO. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 42. An employee stock ownership plan represents a(n) a. good way for a business founder to build his or her position in the company. b. opportunity for employees to acquire an ownership interest in their company. c. harvest method of choice. d. effort to ease investor concerns. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 43. Leonard wants to sell his business, but the bank will not lend the buyer enough money. Between personal savings and the bank loan, the buyer has about 70 percent of the asking price. Which of the following options would be best for Leonard in this situation? a. Look for a different buyer b. Lower the asking price c. Retain a 30 percent ownership in the business and a seat on the advisory board d. Offer to finance the remaining 30 percent, accepting payments over the next few years ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 44. Matt owns a car dealership that is very profitable. Because he plans to retire in 5 to 10 years, Matt has decided to retain ownership for now, but without continuing to grow the business. This change would also allow him to invest for retirement some of the cash that the business is now generating. Which of the following harvesting methods does this example illustrate? a. Sell the firm b. Distribute the cash flows generated by the business to its owners c. Offer stock to the public through an IPO d. Use a private equity recapitalization ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze Copyright Cengage Learning. Powered by Cognero.

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45. The mere fact that a firm is earning high rates of return on its asset indicates that a. the firm is worth more as a going concern than as a dead one. b. downsizing is likely to be an economically sound option for the business. c. it is time to start growing the business again. d. it might be wise to further limit the cash flows returned to investors. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 46. Paul is approaching retirement and has decided to siphon off funds from his company rather than sell it. From his perspective, the advantage of systematically withdrawing cash from the firm is a. retaining control. b. preserving cash for later reinvestment. c. greater latitude in seeking out a buyer for the firm. d. increasing long-term returns from the business. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 47. Nettie's Knits, Inc., paid taxes on its net income and then distributed part of the earnings as dividends to investors. These investors paid tax on the dividends they received. This practice is known as a. initial public offering. b. double taxation. Copyright Cengage Learning. Powered by Cognero.

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c. twice taxation. d. harvesting taxation. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 48. Pat, owner of Pat's Welding, LLC, would like to let someone else run the day-to-day operations while he continues to draw an income from the business. Because the business is an LLC, Pat will not have to be concerned about a. a reduction in the value of the company. b. seller financing. c. paying a brokerage fee. d. double taxation on his income. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 49. Harvey has invested all of his money in his thriving business. He would like to recoup some of his investment but not completely sell off his business. This might be a good time for him to consider selling stock to the public in a(n) a. ESOP. b. IPO. c. MBO. d. LBO. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 50. An IPO occurs when a company offers its stock to a. investment practitioner organizations. b. family. c. intrastate private investors. d. the general public. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 51. Going public can be beneficial to a firm by helping it a. create a liquid currency to fund future acquisitions. b. avoid becoming a takeover target in the future. c. erect a shield against the fluctuations of the stock market. d. offer better compensation packages to attract superior management talent. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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52. Having publicly traded stock can be beneficial to owners in that a public market offers a. greater liquidity. b. protection against an unwanted harvest. c. insight into how to improve the performance of the firm. d. a justification for refusing requests for ESOP options. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 53. Charles and Nancy have decided to sell their family business and would like to transfer ownership to the next generation. Which of the following harvesting forms would be best? a. Cash flow distribution b. Initial public offering c. Private equity recapitalization d. Selling to a strategic buyer ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 54. Valerie is beginning to think of harvesting her company. Which of the following questions should be asked first? a. Why does she want to harvest? b. What is the value of her firm? c. Does the firm have a leadership succession plan in the event that the firm sells? d. What will be the method of payment? Copyright Cengage Learning. Powered by Cognero.

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ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 55. Eleanor has money to invest and is considering buying a company. When comparing her alternatives, her _____ on any investment is the rate of return that she could earn on a similar investment. a. projected future value b. sunk cost c. present value d. opportunity cost ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 56. Two years ago, Harold inherited $30,000 and decided to open a coffee shop in his hometown instead of buying stock in Ford Motor Company. The rate of return he could have earned on his investment in Ford stock represents his a. lost profit. b. opportunity cost of funds. c. investment opportunity. d. potential profit. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 57. Which of the following statements best characterizes business valuation? a. Valuation is almost a perfect science. b. Because there are so many intangibles, valuation is mostly an art. c. The buyer determines the value of a business. d. Negotiation skills play an important part in valuation. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 58. Whatever the negotiating skills of the respective parties, harvesting a company requires a a. business broker. b. promise of positive cash flows. c. precise valuation formula. d. willing buyer. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM Copyright Cengage Learning. Powered by Cognero.

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59. Jill is purchasing a web design company that has patented a new form of technology. Which of the following options would be best for her in relation to the web design company's liabilities? a. Buy the firm's assets b. Buy the firm's stock c. Merge the company with her present company d. Any of the three would be acceptable. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 60. Vasily is selling his business. As a harvesting owner, we would expect him to prefer _____ over _____. a. cash; stock b. debt; equity c. equity; debt d. stock; cash ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 61. In a harvest situation, the exiting owners are usually paid in cash or a. tangible assets. b. imputed goodwill. c. favorable publicity. d. stock. ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 62. The effects of the harvesting process often include a. a reduction in time and energy. b. an increased managerial focus. c. an increase in momentum. d. poor performance. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 63. Uncertainties accompanying an impending sale of a business often a. lead to lower employee morale. b. attract the attention of the Securities and Exchange Commission. c. cause the deal to fall through. d. increase costs from added legal services. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Remember 8/29/2018 11:24 AM 12/17/2018 4:09 PM

64. Which of the following groups is always concerned about how to exit a business? a. Investors b. Entrepreneurs c. Employees of the firm d. Investment bankers ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 65. When is the best time to begin thinking about an exit strategy? a. When the owner wants to retire b. When a willing buyer expresses an interest c. When declining health forces the owner to leave active management d. When money is first invested in the business ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 66. After harvesting, many entrepreneurs who remain with their firm as an employee experience _____ conflicts. a. financial b. practical c. cultural Copyright Cengage Learning. Powered by Cognero.

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d. tactical ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 67. Russell sold his small variety store to a large retail chain but has agreed to stay on and manage the store. Russell should expect a. freedom from responsibility. b. a feeling of elation with his new wealth. c. greater independence. d. cultural conflict. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 68. Arthur's company is doing well, but he has grown a bit tired of the daily grind. The idea of selling is appealing to him. Which of the following would you recommend that Arthur do next? a. Ask his advisory board for their opinions. b. Ask a business broker what his business is worth. c. Go public. d. Get advice from someone who has sold a business. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 69. Post-harvest entrepreneurs may become disillusioned when they realize their sense of identity a. was associated with the quest for wealth. b. derived from interactions with employees. c. was intertwined with their business. d. does not return after joining in social or charitable work. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 70. Before he executes his exit strategy, Arthur should a. understand why he wants out. b. make sure his heirs approve his exit strategy. c. find a hobby to occupy his time. d. plan his budget based on the sudden inflow of cash. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM Copyright Cengage Learning. Powered by Cognero.

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71. Discuss the importance of having a harvest plan. ANSWER: Harvesting, or exiting, is the method that owners and investors use to get out of a business and, ideally, reap the value of their investment in the firm. Without an effective harvest plan, entrepreneurs are unable to capture the full value of the business they have worked so hard to create. An entrepreneur needs to understand that harvesting encompasses more than merely selling and leaving a business. It involves capturing value (cash flows), reducing risk, and creating future options. In addition, there are personal, nonfinancial considerations for entrepreneurs. Owners may receive a lot of money for their firms but still be disappointed with the harvest if they are not prepared for a change in lifestyle. Thus, carefully designing an intentional harvest strategy is as essential to an entrepreneur's personal success as it is to his or her financial success. The harvest is vitally important to a firm's investors as well as to its founder. Investors who provide high-risk capital—particularly angels and venture capitalists—generally insist on a well-thought-out harvest strategy. They realize that it is easy to put money into a business but difficult to get it out. As a result, a firm's appeal to investors is driven, in part, by the availability of harvest options. If investors are not convinced that harvesting opportunities will exist, they will be unlikely to invest. POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-1 The Importance of the Harvest QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 72. What are the potential upsides and downsides of an employee stock ownership plan (ESOP) to both the owner and employees of a company? ANSWER: An owner can sell all of her or his stock to the ESOP and still retain a management position with the firm, thereby effectively maintaining control of the business. An ESOP can also create significant tax advantages for the seller.

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE: HAS VARIABLES:

A reason frequently given by owners for selling to employees is to create an incentive for them to work harder—by giving them a piece of the profits. However, employee ownership is not a panacea. Although advocates maintain that employee ownership improves motivation, leading to greater effort and reduced waste, the value of increased employee effort resulting from improved motivation varies significantly from firm to firm. Selling all or part of a firm to employees works only if the company's employees have an owner's mentality—that is, they do not think in "9-to-5" terms. An ESOP may provide a way for the owner to sell the business, but if the employees lack the required mindset, it will not serve the business well in the future. Employee education is necessary if an ESOP is to be effective. 1 Hard 13-2 Methods of Harvesting a Business Essay False

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STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 73. List and describe the three types of leveraged buyout (LBO) sales to financial buyers. ANSWER: In leveraged buyouts (LBOs), high levels of debt financing are used to acquire firms. There are three types of LBOs: 1. Bust-up LBOs. With bust-up LBOs, the assets of the acquired firm are sold to repay the debt. 2. Build-up LBOs. With build-up LBOs, a number of related businesses are acquired to create a larger enterprise, which may eventually be taken public via an initial public offering (IPO). 3. Management buyouts (MBOs). An MBO is an LBO in which management is part of the group buying the company. POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 74. What are the advantages and disadvantages of harvesting by distributing the firm's cash flows? ANSWER: Harvesting by slowly withdrawing a firm's cash from the business has two important advantages: 1. The owners can retain control of the business while they harvest their investment. 2. They do not have to look for a buyer or incur the expenses associated with consummating a sale. There are also some disadvantages: 1. Reducing investment when a firm faces valuable growth opportunities could leave the firm unable to sustain its competitive advantage. The result may be an unintended reduction in the value of the business. 2. There may be tax disadvantages to an orderly liquidation, compared with other harvest methods. For example, if a corporation distributes cash as dividends, both the company and the stockholders are taxed on the income; this is known as double taxation. 3. For the entrepreneur who is simply tired of day-to-day operations, siphoning off the Copyright Cengage Learning. Powered by Cognero.

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cash flows over time may require too much patience. POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 75. Name four benefits of using an initial public offering (IPO) as a harvesting method. ANSWER: An IPO has several benefits: 1. It can enhance the reputation of the business if done successfully. 2. It provides an additional source of capital to grow the business. 3. A stock that is publicly traded can create an ongoing interest in the company and its continued development. 4. Publicly traded stock is more attractive to key personnel whose incentive pay includes the firm's stock. POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-2 Methods of Harvesting a Business QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 76. Todd's small company, Nimbus, developed a video game called Combat Skill that took off among gamers. Farbase EAD is a large video game developer with its own gaming system that has offered to buy Nimbus. Explain this type of harvest transaction and what motivations Farbase EAD may have for purchasing Nimbus. ANSWER: This transaction would be considered a sale to strategic buyer because Farbase EAD is in a similar line of business and is looking for popular games to offer on its console. Nimbus also appears to have talented game developers that could give Farbase EAD a competitive advantage over other competitors. POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-2 Methods of Harvesting a Business Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.02 - LO: 13-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:14 PM 77. John is developing a harvest plan and figuring the value of his art gallery. What two issues are of importance? ANSWER: As John's art gallery moves toward the harvest, two issues are of primary importance: 1. The harvest value (the firm's selling price). Value is created when a firm's return on invested capital is greater than the investors' opportunity cost of funds, which is the rate of return that could be earned on an investment of similar risk. 2. The method of payment when a firm is sold. The seller can be paid in cash or in the stock of the acquiring firm. POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 78. What are professional and personal issues an entrepreneur may face in the period of time from when the harvest is announced and it is completed? ANSWER: • Harvesting takes a lot of time and energy on the part of the firm's management team and can be very distracting from day-to-day affairs. The result is often a loss of managerial focus and momentum, leading to poor performance. • Uncertainties accompanying an impending sale often lower employee morale. The stress can affect the whole organization, as employees become anxious about the prospect of a new owner. • A buyer can be quite unemotional and detached, while a seller is likely to be much more concerned about nonfinancial considerations. • Entrepreneurs have a real need for good advice, both from experienced professionals and from those who have personally been through a harvest. • When an entrepreneur has invested a substantial part of her or his working life in growing a business, a real sense of loss may accompany the harvest. Walking away from employees, clients, and one's identity as a small business owner may not be the wonderful ride into the sunset that was expected. Copyright Cengage Learning. Powered by Cognero.

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•

"Seller's remorse" is a major issue for a number of entrepreneurs.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM 79. Ellen is a dentist and has decided to develop a harvest plan. She wants her efforts to be successful and effective. Discuss suggestions for crafting an effective exit strategy. ANSWER: • Anticipate the harvest. Hopefully Ellen has thought about the harvest strategy from the beginning of the practice. She needs to be prepared from day one and begin planning in anticipation of a harvest. This planning will better prepare her for unexpected changes and options. • Expect conflict—emotional and cultural. Ellen has both financial and emotional ties to the business. Any type of change will affect her directly as well as her employees and family members. Expecting conflict would better prepare Ellen for when it arises. • Get good advice. It is important for Ellen to get professional and personal advice from individuals who can relate to the circumstances and give a nonbiased opinion. • Understand what motivates her. Ellen should think about why she wants to leave the practice and what she wants to do afterward. She should understand the practice is part of her personal identity and prepare for life after the business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 13-4 Developing an Effective Harvest Plan QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.13.04 - LO: 13-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/17/2018 4:09 PM Match the term with its definition. a. build-up LBO b. business broker c. bust-up LBO Copyright Cengage Learning. Powered by Cognero.

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d. double taxation e. employee stock ownership plan (ESOP) f. harvesting (exiting) g. initial public offering (IPO) h. leveraged buyout (LBO) i. management buyout (MBO) j. opportunity cost of funds k. private equity recapitalization l. seller financing DIFFICULTY: Easy REFERENCES: 13-1 The Importance of the Harvest 13-2 Methods of Harvesting a Business 13-3 Firm Valuation and Payment Methods QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.13.01 - LO: 13-1 SMAL.LONG.20.13.02 - LO: 13-2 SMAL.LONG.20.13.03 - LO: 13-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/21/2018 11:45 AM 80. Taxation of income that occurs twice—first as corporate earnings and then as stockholder dividends ANSWER: d POINTS: 1 81. Provision of debt and equity by private equity investors that allows an entrepreneur to cash out part of his or her investment ANSWER: k POINTS: 1 82. A leveraged buyout involving the purchase of a group of similar companies with the intent of making the firms into one larger company for eventual sale or to be taken public ANSWER: a POINTS: 1 83. The rate of return that could be earned on another investment of similar risk ANSWER: j POINTS: 1 84. The process used by entrepreneurs and investors to reap the value of their investment in a business when they leave it ANSWER: f POINTS: 1 85. A leveraged buyout involving the purchase of a company with the intent of selling off its assets Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 86. Financing in which the seller accepts a note in lieu of cash from a buyer in partial payment for a business ANSWER: l POINTS: 1 87. A leveraged buyout in which the firm’s top managers become significant shareholders in the acquired firm ANSWER: i POINTS: 1 88. A professional who assists in the buying and selling of a business ANSWER: b POINTS: 1 89. The first sale of shares of a company's stock to the public ANSWER: g POINTS: 1 90. A trust fund that uses employee retirement contributions to buy stock in the employer's company ANSWER: e POINTS: 1

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Chapter 14 - Building Customer Relationships 1. Customer relationship management means different things to different businesses. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-1 What Is Customer Relationship Management?? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 2. There must be a company-wide commitment to CRM concept if CRM is to be productive. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-1 What Is Customer Relationship Management? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 3. A transactional relationship is an association between a business and a customer that begins or ends with a purchase or a business exchange. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 4. The ability to enjoy one-on-one contact with customers has always been a competitive advantage for large firms. a. True b. False ANSWER: False RATIONALE: This ability has been characteristic of small businesses. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 5. Regardless of the nature of the business, small firms can gain a competitive edge by providing exceptional customer service. a. True b. False ANSWER: True POINTS: 1 REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 6. Addressing a customer by name typically means very little to them. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: RATIONALE:

False Doing business on a first-name basis is a common sign of extraordinary personal customer service. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 7. It is important to keep in touch with a customer and make a sales pitch each time. a. True b. False ANSWER: False RATIONALE: While it is important to stay in touch, it is better to ask for feedback each time than to try to sell something. Customers want to know you care more about them than just getting another order from them. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 8. Customer service issues are always identified through a formal review process within a small firm. a. True b. False ANSWER: False RATIONALE: The analysis of complaints may uncover possible weaknesses in product quality and/or customer service. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 9. Initial CRM support efforts should be made using the website because the web developers have the most customer contact. a. True b. False ANSWER: False RATIONALE: The sales department typically generates the greatest amount of customer contact. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 10. Lack of internal expertise is a major justification for using outside CRM services. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 11. A consumer's recognition of a problem can be characterized as routine if the problem evolves over time. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: RATIONALE:

False Routine problems often related to conditions of depletion, i.e. the need for food, sleep or daily products. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 12. In some situations, a small business owner will have to influence need recognition; in others, he or she may simply be able to react to needs that consumers have identified on their own. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 13. In the information search and evaluation stage, the firm’s principal objective is to gain market awareness. a. True b. False ANSWER: True RATIONALE: The principal objective would be to gain market awareness to potentially be in the customer’s evoked set. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 14. Evoked sets are features or characteristics of products or services that are used to compare brands. a. True b. False ANSWER: False RATIONALE: An evoked set is a group of brands that a consumer is both aware of and willing to consider as a solution to a purchase problem. The features or characteristics of products or services that are used to compare brands are referred to as evaluation criteria. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 15. An evoked set is a group of brands that a consumer is both aware of and willing to consider as a solution to a purchase problem. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM Copyright Cengage Learning. Powered by Cognero.

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16. Post-purchase dissonance has been shown to be unrelated to customer satisfaction because it occurs after customers have satisfied their needs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 17. Small businesses must strive to understand post-purchase dissonance among their customers and to manage it effectively. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 18. Post-purchase dissonance and consumer complaints are both directly related to customer satisfaction. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 19. Only three classes of needs—social, psychological, and spiritual—can be connected to behavior through motivations. a. True b. False ANSWER: False RATIONALE: All four classes of needs can be connected to behavior: physiological, social, psychological and spiritual. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 20. Consumer needs can be completely satisfied by proper customer relationship management. a. True b. False ANSWER: False RATIONALE: Customer needs are never completely satisfied resulting in the need for businesses. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 21. An investigation of a culture within a narrow definitional boundary (e.g., by age, geographical location) is called perceptual categorization Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: RATIONALE:

False Perceptual categorization is a process by which things that are similar are perceived as belonging together. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 22. Marketers create needs that offer unique motivations to consumers. a. True b. False ANSWER: False RATIONALE: Marketers can not create needs, but they can offer unique motivation to consumers by presenting acceptable reasons for purchasing a product or service. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 23. A marketer must determine which motivations the consumer will perceive as acceptable to satisfy a need in a given situation. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 24. Attitudes have an indirect impact on consumer behavior. a. True b. False ANSWER: False RATIONALE: Attitudes directly impact behavior, acting as an obstacle or a catalyst in bringing a customer to a product. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 25. Attitudes are forces that organize and give direction to the tension caused by unsatisfied needs. a. True b. False ANSWER: False RATIONALE: Attitudes are enduring opinions, based on knowledge, feeling, and behavioral tendency. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM Copyright Cengage Learning. Powered by Cognero.

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26. Because culture drastically affects the behavior patterns and values of people, it has tremendous impact on the purchase and use of products. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 27. Educational level is the single most important determinant of social class. a. True b. False ANSWER: False RATIONALE: While education, possessions, and sources of income do have an influence, occupation is probably the single most important determinant. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 28. Every group to which an individual belongs is a reference group for that consumer. a. True b. False ANSWER: False RATIONALE: A reference group refers to those that which an individual allows to influence his or her behavior; group membership is not a requirement. POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 29. In general, opinion leaders are knowledgeable, visible, and have exposure in the mass media. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 30. Which of the following economic benefits are associated with maintaining relationships with current customers? a. Small increases in customer retention can translate into large increases in profits. b. Existing customers spend less money than new customers. c. Order processing costs are higher for current customers. d. All of these are benefits associated with maintaining customer relationships. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-1 What Is Customer Relationship Management? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM Copyright Cengage Learning. Powered by Cognero.

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31. CRM is the business version of a. the Ten Commandments. b. the Bill of Rights. c. the Golden Rule. d. Maslow’s hierarchy of needs. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-1 What Is Customer Relationship Management? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 32. A basic idea forming the foundation of customer loyalty for small firms includes the notion that a. superior customer service always leads to customer purchases. b. customer loyalty will mean constant customer satisfaction. c. small businesses have the potential to provide superior customer service. d. customer satisfaction is being ignored by large firms. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 33. Regina is so satisfied with her pharmacist that she refers her friends and colleagues, providing a(n) _____ benefit of maintaining relationships with current customers. a. economic b. marketing c. psychological d. social ANSWER: a POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 14-1 What Is Customer Relationship Management? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 34. Diane is a loyal, long-term customer at Burke’s Furniture Store. It would be expected that she would a. be willing to pay more for Burke’s Furniture’s products. b. have higher order-processing costs because she purchases so much. c. potentially spend less as she purchases more products over time. d. request special discounts and loyalty benefits. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-1 What Is Customer Relationship Management? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 35. An approach that recognizes that, with every interaction, customers learn something about a company that will affect their desire to do business there in the future is known as a. perceptual categorization. b. cognitive dissonance. c. transactional relationship. d. customer experience management. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Remember 8/29/2018 11:24 AM 12/18/2018 5:24 PM

36. Molly has had repeated positive experiences with her local coffee shop. They suggest new flavors, call her by her first name, and donate to a local charity that Molly supports. Molly’s experiences, as a result, contribute to the firm’s CRM a. organizational culture. b. customer cost. c. value equation. d. customer satisfaction. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 37. As an owner of a floral design business, Tim’s highest priority for the florist’s CRM program should be a. marketing efforts to bring in customers who haven’t bought flowers recently. b. finding the right computer software for an online floral ordering program. c. determining if existing customers are satisfied with past floral arrangements. d. identifying how often customers will purchase flowers. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-1 What Is Customer Relationship Management? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 38. Most customer service problems are identified by a. personal observation. Copyright Cengage Learning. Powered by Cognero.

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b. outside consultants. c. customer complaints. d. entries in a suggestion box. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 39. To establish an effective customer service program, which of the following should be completed first? a. Customer service quotient b. Mystery shopper visit c. Survey on customer attitudes d. Supplier service analysis ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 40. Being closer to their customers allows small business owners to avoid _____, which large firms typically experience as a result of their multiple layers of management. a. complaints on social media b. distorted complaints c. anonymous complaints d. information distortion ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 41. CRM software programs are often implemented into _____ first since this area of a company typically generates the greatest amount of customer contact. a. data management departments b. sales departments c. personnel departments d. customer service departments ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 42. A customer’s e-mail address would most likely be stored in which of the following categories of a customer profile? a. Personal information b. Demographics c. Lifestyle and psychographic data d. Transaction data ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze Copyright Cengage Learning. Powered by Cognero.

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43. Freida used a discount coupon to purchase a new product. In which of the following categories of the customer profile should this be recorded? a. Personal information b. Lifestyle and psychographic data c. Profile of past responses d. Transaction data ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 44. Information taken from warranty cards would be stored in which of the following categories of a customer profile? a. Personal information b. Complaints c. Lifestyle and psychographic data d. Transaction data ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 45. Which of the following statements is true about Yelp? a. It is an online forum where customers can post reviews. b. Only negative reviews have any impact. c. Once a customer posts a negative review, the business is helpless to respond. Copyright Cengage Learning. Powered by Cognero.

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d. All of these are true about Yelp. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 46. Mary, an independent sales representative, is hindered in her ability to be in contact with clients because of dropped calls on her cell phone. Her decision to purchase a cellular booster for her phone shows that Mary has just proceeded through the _____ stage of consumer decision making. a. post-purchase evaluation b. information search and evaluation c. need recognition d. purchase decision ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 47. Jeff has concluded that his company, which sells professional football merchandise, needs to increase its line of shirts. He is in the _____ stage of the consumer decision-making process. a. information search and evaluation b. need recognition c. post-purchase evaluation d. purchase decision ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 48. Linda is considering several colleges at which to finish her culinary degree. She is in the _____ stage of the consumer decision-making process. a. information search and evaluation b. need recognition c. post-purchase evaluation d. purchase decision ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 49. Bob never purchases bottled water when he is thirsty even if it is available. This behavior indicates that bottled water a. does not meet Bob’s evaluative criteria. b. increases Bob’s cognitive dissonance. c. is not included in Bob’s evoked set. d. decreases Bob’s perceptual categorization. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply Copyright Cengage Learning. Powered by Cognero.

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50. According to consumer decision-making process, _____ is the final stage through which consumers progress. a. cognitive dissonance b. evaluative categorization c. post-purchase evaluation d. purchase decision ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 51. The dress looked so cute in the store window, but after she brought it home, Victoria began having second thoughts about her purchase. Victoria is experiencing a. post-purchase dissonance. b. post-purchase satisfaction. c. cognitive dissonance. d. post-decisional distress. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 52. When Sarah decided to make an offer on a house, she was in the _____ stage of the consumer decision-making process. a. information search and evaluation b. need recognition Copyright Cengage Learning. Powered by Cognero.

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c. post-purchase evaluation d. purchase decision ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 53. In which of the following stages of the consumer decision-making process is Josh when he becomes concerned about whether his friends will enjoy the video game he downloaded? a. Information search and evaluation b. Need recognition c. Post-purchase evaluation d. Purchase decision ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 54. Attending a prayer breakfast is most likely an attempt to satisfy which of the following categories of need? a. Physiological b. Psychological c. Spiritual d. Social ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 55. Although consumer needs are innumerable, they can be identified as falling into all of the following categories EXCEPT a. motivational. b. spiritual. c. physiological. d. social. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 56. Juan’s belief that all low-calorie sodas taste awful is an example of a. cognitive dissonance. b. the elimination of an item in an evoked set. c. perceptual categorization. d. unilateral indifference. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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57. The reason that a group of uniformed people walking down the street playing musical instruments is recognized as a band is the result of a. characteristic profiling. b. evaluative criteria. c. perceptual categorization. d. problem recognition. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 58. The individual processes that give meaning to the stimuli confronting consumers are a(n) a. motivation. b. perception. c. attitude. d. cognition. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 59. June has always believed that the resale furniture store doesn’t have quality furniture because the furniture has been used by others. This _____ may cause her to avoid the store and shop at a store specializing in new furniture across town. a. attitude b. cognitive dissonance c. motivation Copyright Cengage Learning. Powered by Cognero.

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d. perceptual categorization ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 60. Julie’s preference for a certain style of barbecue developed in her state is the result of which of the following sociological influences? a. Culture b. Opinion leaders c. Reference groups d. Social class ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 61. Behavioral patterns and values that characterize a group of consumers in a target market are called a. reference groups. b. cultures. c. social classes. d. perceptual categories. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 62. Billy admires firemen. He wants to dress like them, wear a fireman’s hat, and pretend to put out fires. For Billy, firemen are a(n) a. referral group. b. reference group. c. perceptual group. d. associate group. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 63. Erin often shops at a retail store where her friends shop because of her desire to be affiliated with the group. The friends are exerting _____ power over Erin. a. expert b. group c. referent d. reward ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM Copyright Cengage Learning. Powered by Cognero.

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64. In general, a person can be an opinion leader even if he or she is not a. knowledgeable. b. visible. c. exposed to the mass media. d. nationally known. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 65. Phil Knight, founder of Nike, used which of the following marketing strategies to establish his brand? a. 80/20 principle b. Need recognition c. Five Cool Guys Principle d. Perceptual categorization ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 66. A winery promotes its products by holding wine tastings at the restaurants of outstanding local chefs. The winery is utilizing which of the following sociological influences? a. Cultures b. Opinion leaders c. Reference groups d. Social classes Copyright Cengage Learning. Powered by Cognero.

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ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 67. Nikita’s decision to buy her shoes at the same shop that her boss patronizes is the result of which of the following sociological influences? a. Cultures b. Opinion leaders c. Reference groups d. Social classes ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 68. List the five major economic benefits of maintaining relationships with current customers. ANSWER: Maintaining relationships with current customers offers the following potential economic benefits: 1. The costs of acquiring a new customer is greater than holding on to an old customer. 2. Long-time customers trust you and thus tend to spend more money than new customers do. 3. Happy customers refer their friends and colleagues, leading to more sales. 4. It costs less to process orders for established customers, because they are already in the system and know how it works. 5. Current customers buy without discounts, so they are willing to pay more for products. POINTS:

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DIFFICULTY: Hard REFERENCES: 14-1 What Is Customer Relationship Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 69. Caleb owns a small deli and is focusing on developing his business relationship with customers. What four underlying beliefs should Caleb consider in order to develop and provide great customer service? ANSWER: Four basic beliefs underlie the emphasis on providing exceptional customer service: 1. 2. 3. 4.

Small businesses have the potential to provide superior customer service. Superior customer service leads to customer satisfaction. Customer satisfaction results in positive transactional relationships. Positive transactional relationships lead to increased profits.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 70. Briefly describe what customer relationship management (CRM) is. ANSWER: Formally defined, customer relationship management (CRM) is a "company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on precisely defined customer groups." It is a process or method that can be used to learn more about the needs and behaviors of customers with the specific purpose of building strong relationships with them. CRM involves treating customers the way the entrepreneur would want to be treated if he or she was a customer—that business version of the Golden Rule. Regardless of the level of a firm's commitment to customer relationship management, the central message of every CRM program is this: "Cultivate customers for more than a onetime sale." POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Essay Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 71. List and briefly describe some approaches to improving the effectiveness of customer service efforts. ANSWER: Establishing an effective customer service program begins with determining how well a firm is currently serving its customers (sometimes referred to as a firm's customer service quotient). Strategies can then be developed to improve the effectiveness of customer service efforts. Some popular approaches to creating customer service strategies include the following: • • • • • • •

Provide an exceptional experience throughout every transaction. Ensure that customers are acknowledged, appreciated, and find it easy to do business with you. Provide sales materials that are clear and easy to understand. Include website information, marketing materials, retail displays, etc. Respond promptly to customers' requests and concerns. Have a service recovery plan in place. Listen to customers, and respond accordingly. Solicit feedback, encourage interaction, stay engaged throughout transactions, and take the appropriate action(s) to please the customer. Stand behind products and/or services. Provide guarantees and warranties, ensuring customers that you deliver on your promises. Also, create products and deliver services that exceed expectations. Treat customers as family members and best friends. Value customers in the same way that you honor those you care most about. Stay in the hearts and minds of customers. Don't take customers for granted. Find ways to let them know that you have their best interests in mind.

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• •

• • •

Doing business on a first-name basis. Small ventures that know their customers by name and greet them as friends establish a bond that is powerful and encourages loyalty. Keeping in touch. Face-to-face and phone conversations are much more effective than e-mail messages or mass mailings. Asking for feedback during these interactions is helpful to the business and shows that the entrepreneur is committed to getting customers’ approval. It also confirms that the entrepreneur cares about more than selling. Finding ways to help. Helping customers doesn’t always lead to an immediate sale, but it can be good for business, and at a minimal cost. Customizing service to meet customer preferences. By remembering customers’ personal preferences and adjusting service to meet them, entrepreneurs increase the value of what they offer. Addressing problems promptly. When an issue arises, a successful business takes steps to resolve it quickly. Doing so lets a customer know that he or she is important to the business.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 73. How can technology improve customer relationships? ANSWER: Analytical technologies—from basic spreadsheets to sophisticated customer relationship management (CRM) packages can help a business improve customer relationships. Many small companies keep track of their CRM numbers in a simple spreadsheet that can be expanded and updated as the business grows. When the spreadsheet is no longer enough, a database management package like Microsoft Access can be used. This type of software offers greater utility and flexibility, as it can store large amounts of data and match data from multiple tables. Though not created for this purpose, it can certainly help you manage the data needed to guide customer care, basic advertising campaigns, and other marketing-related initiatives. The most powerful tools available for customer relationship management are software programs designed specifically for CRM. These packages allow companies to gather all customer contact information into a single data management program. Web-based marketers, in particular, are attracted to such technology, because it helps to make their complex job far more manageable. Most online shoppers expect to receive excellent customer service, and companies are much better positioned to give it if they use the options for interaction and personal attention that are designed into the software. CRM emphasizes such sales activities as filling orders promptly and accurately, managing Copyright Cengage Learning. Powered by Cognero.

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follow-up contacts to ensure customer satisfaction, and providing user-friendly call centers to handle all inquiries, including complaints. It's a complex mix of tasks, but technologies are available to support all of these activities and many others. POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 74. Aly’an is a country music band that has a new CD and is gaining a fan base. The band wants to connect with their fans, increase CD sales, and perform more shows. What are tools they could use to drive more people to their website? ANSWER: The list of tools includes blogs, social media sites, and other online communities. • •

•

Blogs. The band could create a blog to post information on upcoming shows and information "behind the scenes." They could increase interaction from fans by asking for feedback posts on the blog. Social media sites. Aly’an could utilize Facebook to create events for upcoming shows and post pictures of their activities. Facebook could also be used to run promotions and offer contact information for venues or persons wanting to book the band. Twitter could also be utilized to keep fans up to date with hourly/daily information. Online communities. Other online communities and an e-newsletter could be utilized to keep consumers informed on events with the band. It is also a good way to track what pages fans are accessing and in what information they are interested.

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• • • • • • •

Personal information. Name, address, phone number, e-mail address, clothing sizes, birthday, hobbies, memberships, etc. Demographics. Background information that can be used for market segmentation and other data analysis purposes, such as age, marital status, names and ages of family members, and geographic location. Lifestyle and psychographic data. Homeowner versus renter status, car ownership (model and year), media preferences, payment methods of choice, recreational interests, etc. Internet information. Time spent online, frequency of visits to the company's website, and other online habits. Transaction data. Complete transaction history, including details such as prices paid, SKUs (which identifies specific products purchased), form of order (online, phone, in-store, etc.), mode of payment, and delivery dates. Profile of past responses. Sales calls and service requests—including all customerand company-initiated contacts—responses to past product and service promotions, and incentives redeemed. Complaints. Complete history of complaints regarding past purchases or service.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 76. How can a customer database be used to identify a company's best customers? ANSWER: The 80/20 principle maintains that 80 percent of a company's sales will come from 20 percent of its customers. If a company has created a customer database and organized its data appropriately, it then becomes possible to identify the 20 percent of customers who are the most loyal and who also deliver the greatest profitability to the company. Often, these "best customers" can be identified by running a recency-frequency-monetary analysis, which reveals those who are most likely to buy from the business in the future because they have made purchases recently, frequently, and in amounts that exceed some appropriate minimum. A customer database can also be used to estimate the customer lifetime value (CLV) of those who buy from the business. The CLV is the total profit expected from all future sales to a customer. The CLV can also give sales and service employees a better idea of how much they should spend to acquire and retain customers. POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-3 Using Technology to Support Customer Relationship Management QUESTION TYPE: Essay HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.03 - LO: 14-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/26/2018 1:14 PM 77. Briefly describe each stage of the customer decision-making process. ANSWER: Consumer decision making flows through four stages: 1. Need recognition. Need recognition occurs when a consumer realizes that her or his current situation differs significantly from some ideal state. 2. Information search and evaluation. This stage involves the collection and evaluation of appropriate information. Internal sources of insight (usually from previous experiences with a product or brand) typically are considered first. However, prospective buyers usually turn to external sources (for example, input from friends and family, product-rating data from Consumer Reports, or feature descriptions from advertisements or salespeople) when their own past experience or knowledge is limited and the cost of gathering outside information is low. The search for information should help to clarify the purchase need and allow the consumer to establish evaluative criteria that will guide the decision process as it continues to unfold. That is, he or she will decide on the features or characteristics of the product or service that are to be used for comparison. 3. Purchase decision. Once consumers have evaluated brands in their evoked set (a group of brands that a consumer is both aware of and willing to consider as a solution to a purchase need), they must decide how and where to make the purchase. 4. Post-purchase evaluation. Post-purchase evaluation may lead to psychological dissonance or anxiety and complaint behavior, which can negatively influence customer satisfaction with the product or service and the business that provides it. POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 78. Mandy is shopping for a new car. She is visiting a privately-owned lot in her hometown and describes to Jane, the salesperson, that she wants a four-door sedan with high fuel economy and a leather interior. Jane then shows Mandy three cars that Jane thinks may fit Mandy’s preferences. What stage of the decision-making process is Mandy in, and what should Jane understand about Mandy’s search to complete the sale? ANSWER: Mandy is in the information search and evaluation stage of the decision-making process. She Copyright Cengage Learning. Powered by Cognero.

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is searching using external sources (car lot and Jane). Mandy’s description to Jane of low gas usage, leather interior, and a sedan is her evaluative criteria. The cars that Jane shows Mandy are an example of the evoked set because she is considering them to meet her purchase need. Because Mandy was clear on her evaluative criteria, Jane had to gain market awareness of the cars on the lot that would meet Mandy’s criteria. Jane should help Mandy to make a purchase decision but without putting so much pressure on Mandy that she suffers from postpurchase dissonance after the sale. POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-4 Customers as Decision Makers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.04 - LO: 14-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/26/2018 1:15 PM 79. List and briefly describe the four psychological influences that have the greatest relevance to small businesses. ANSWER: The four psychological influences that have the greatest relevance to small businesses are needs, perceptions, motivations, and attitudes. • • • •

Needs. Needs are often described as the starting point for all behavior. Although consumer needs are innumerable, they can be identified as falling into four categories—physiological, social, psychological, and spiritual. Perceptions. Perception encompasses those individual processes that ultimately give meaning to the stimuli consumers encounter. Motivations. Motivations are goal-directed forces that organize and give direction to the tension caused by unsatisfied needs. Attitudes. An attitude is an enduring opinion, based on a combination of knowledge, feelings, and behavior tendencies.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-5 Understanding Psychological Influences on Customer Behavior QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.05 - LO: 14-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 80. What should entrepreneurs understand about sociological influences on customers? Copyright Cengage Learning. Powered by Cognero.

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ANSWER:

•

Culture refers to the behavioral patterns and values that characterize a group of customers in a target market. Owners of small businesses should remember that cultural influences are subtly embedded within a society and these cultural norms change. What works well as a marketing strategy today might not work in the future. Social classes are divisions within a society having different levels of social prestige. Small businesses selling routine staple products or services will not be impacted by this influence as much as higher-end products or services. The marketing message should reflect the target’s social class. Reference groups are smaller groups that an individual allows to influence his or her behavior. Marketers for small businesses need to understand why the influence occurs and how it can be used to promote the sale of a product or service. Coercive, reward, referent, expert, and legitimate power will influence purchases and also must be understood. Opinion leaders are group members who play a key communications role. Generally speaking, opinion leaders are knowledgeable, visible, and have exposure in the mass media. A small business firm can enhance its own image by identifying with such leaders.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM Match the term with its definition. a. attitude b. culture c. customer experience management (CEM) d. customer lifetime value (CLV) e. customer relationship management (CRM) f. motivations g. needs h. opinion leaders i. perception j. perceptual categorization k. reference groups DIFFICULTY: Easy REFERENCES: 14-1 What Is Customer Relationship Management? 14-2 Outstanding Customer Relationships Through Extraordinary Service 14-3 Using Technology to Support Customer Relationship Management 14-5 Understanding Psychological Influences on Customer Behavior 14-6 Understanding Sociological Influences on Customer Behavior Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.01 - LO: 14-1 SMAL.LONG.20.14.02 - LO: 14-2 SMAL.LONG.20.14.03 - LO: 14-3 SMAL.LONG.20.14.05 - LO: 14-5 SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics Information Technologies Operations Management Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 81. Small groups that an individual allows to influence his or her behavior ANSWER: k POINTS: 1 82. Goal-oriented forces that organize and give direction to the tension caused by unsatisfied needs ANSWER: f POINTS: 1 83. Behavioral patterns and values that characterize a group of consumers in a target market ANSWER: b POINTS: 1 84. A group member who plays a key communication role ANSWER: h POINTS: 1 85. The individual processes that give meaning to the stimuli confronting consumers ANSWER: i POINTS: 1 86. An approach that recognizes that, with every interaction, customers learn something about a company that will affect their desire to do business there in the future ANSWER: c POINTS: 1 87. The process of grouping things that are perceived as being similar ANSWER: j POINTS: 1 88. A company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on specific customer groups ANSWER: e Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 89. An enduring opinion based on a combination of knowledge, feelings, and behavioral tendencies ANSWER: a POINTS: 1 90. The starting point for all behavior ANSWER: g POINTS: 1 Match the term with its definition a. 80/20 principle b. customer database c. customer segmentation strategy d. evaluative criteria e. evoked set f. post-purchase dissonance g. recency-frequency-monetary analysis h. social classes i. touch point j. transactional relationship DIFFICULTY: Easy REFERENCES: 14-2 Outstanding Customer Relationships Through Extraordinary Service 14-3 Using Technology to Support Customer Relationship Management 14-4 Customers as Decision Makers 14-6 Understanding Sociological Influences on Customer Behavior QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.14.02 - LO: 14-2 SMAL.LONG.20.14.03 - LO: 14-3 SMAL.LONG.20.14.04 - LO: 14-4 SMAL.LONG.20.14.06 - LO: 14-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics Information Technologies Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:24 AM DATE MODIFIED: 12/18/2018 5:24 PM 91. A process of identifying customers that fit into smaller, more homogeneous groups ANSWER: c POINTS: 1 92. An analysis that reveals customers most likely to buy from a firm in the future because they have made purchases recently, frequently, and in amounts that exceed some established minimum ANSWER: g Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 93. An interaction between a business and its customers ANSWER: i POINTS: 1 94. The features or characteristics of a product or service that customers use for comparison ANSWER: d POINTS: 1 95. A collection of information about a customer as defined by CRM goals including personal, demographic, lifestyle, and transaction data; online habits; past responses; and complaint history ANSWER: b POINTS: 1 96. A principle that maintains that 80 percent of a company’s sales will come from 20 percent of its customers ANSWER: a POINTS: 1 97. A group of brands that a consumer is both aware of and willing to consider as a solution to a purchase need ANSWER: e POINTS: 1 98. The psychological tension or anxiety that occurs when a customer has second thoughts immediately following a purchase ANSWER: f POINTS: 1 99. An association between a business and a customer that begins (or ends) with a purchase or a business deal ANSWER: j POINTS: 1

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Chapter 15 - Product Development and Supply Chain Management 1. All small firms want to grow. a. True b. False ANSWER: False RATIONALE: Some entrepreneurs find that maintaining their current levels is sufficient. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 2. If inventory needs grow with higher sales, the increase in accounts receivable will cover this cost. a. True b. False ANSWER: False RATIONALE: While increased sales will cause a need for additional inventory, the increase in accounts receivables may be a concern if the accounts receivable is needed to pay for the inventory and other costs. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 3. A growth trap occurs when a company needs cash faster than can be generated in profits. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 4. Because growth in sales is perceived as good for business, no changes will be needed in personnel, operations, or management style. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 5. It is important that small firms gain a competitive advantage that cannot be quickly imitated. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM Copyright Cengage Learning. Powered by Cognero.

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6. Small firms develop significantly more innovations than large companies. a. True b. False ANSWER: True RATIONALE: Small entrepreneurial firms produce twice as many innovations per employee as large firms. These innovations account for half of all those created and 95% of all radical innovations. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 7. During the competitive advantage life cycle, firms can exploit a competitive advantage during the develop stage. a. True b. False ANSWER: False RATIONALE: Firms should capitalize on its advantage during Stage 2, the deploy stage. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 8. The product life cycle and competitive advantage life cycle differ in that the product life cycle reflects the sales and profit trend for a specific product or service, whereas the competitive advantage life cycle is based on the competitive edge of the company overall and can influence the sales of multiple products or services. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-3 The Product Life Cycle and New Product Development Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 9. In small businesses, new product development is best handled through a rigid, structured process. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 10. In the development of the physical product stage of the new product development process, new products are analyzed and ideas that fail to show possible profitability are discarded. a. True b. False ANSWER: False RATIONALE: The physical development stage involves developing a prototype. Financial considerations are completed in the business analysis stage of new product development. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM Copyright Cengage Learning. Powered by Cognero.

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11. Product testing is the last step in the new product development process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 12. Celestina Pugliese, creator of Ready Check Glo, felt her product served an overlooked market. a. True b. False ANSWER: False RATIONALE: Pugliese pursued her innovation because she felt that customers (restaurants) would perceive the product added value (improved service to their customers). POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic STATE STANDARDS: United States - IN - DISC: Creation of Value TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 13. A brand includes the verbal and/or symbolic means of identifying a product. a. True b. False ANSWER: True RATIONALE: A brand is a means of identifying a product—verbally and/or symbolically. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 14. A small firm's special "signature" is called a logo. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 15. Trademark and service mark are legal terms indicating the exclusive right to use a brand to represent products and services, respectively. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic STATE STANDARDS: United States - AK - DISC: Ethical and Legal United States - IN - DISC: Strategy TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM Copyright Cengage Learning. Powered by Cognero.

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16. Packaging has very little to do with increasing the value of the total product by creating a distinctive impression. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 17. Innovative packaging is often the deciding factor for consumers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 18. Labeling information can be limited to the minimum legal requirements because it will put your company at a disadvantage. a. True b. False ANSWER: False RATIONALE: Labeling information should go beyond the specified minimum legal requirements. Warranties can be implied or explicit and are not part of labeling. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-4 Building the Total Product QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic STATE STANDARDS: United States - IN - DISC: Creation of Value United States - AK - DISC: Ethical and Legal TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:30 PM 19. Strategies for goods marketing and services marketing are essentially identical. a. True b. False ANSWER: False RATIONALE: Strategies for the marketing of goods and services are not the same—they differ along a number of dimensions (e.g., tangibility, standardization, and perishability). POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 20. A bed and breakfast inn that adds a restaurant that is open to the public is an example of unrelated product offerings. a. True b. False ANSWER: False RATIONALE: This example illustrates a move from one product/one market (B&B room/B&B guest) to multiple products/multiple markets (B&B room, restaurant/B&B guests, public). POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-5 Product Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:25 AM 12/19/2018 8:45 PM

21. If a firm extends a janitorial cleanser from the industrial market to reach the home market, it is following a one product/multiple markets strategy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 22. A garden center selling two varieties of mint plant has one product item in two product lines. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-5 Product Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 23. According to the Food and Drug Administration regulations, food products must have a standard nutrition label listing the amounts of calories, fat, salt, and nutrients in the product. a. True b. False ANSWER: False RATIONALE: This requirement comes from the Nutrition Labeling and Education Act of 1990. POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 15-6 The Legal Environment QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 24. A utility patent covers the appearance of a product and its inseparable parts. a. True b. False ANSWER: False RATIONALE: A design patent covers the appearance of a product and everything that is an inseparable part of the product. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-6 The Legal Environment QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 25. Trade dress describes those elements of a firm's distinctive operating image that are specifically protected under a trademark, patent, or copyright. a. True b. False ANSWER: False RATIONALE: The opposite is true. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-6 The Legal Environment QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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26. Attorneys are rarely used by entrepreneurs when conducting a trademark search. a. True b. False ANSWER: False RATIONALE: The task is complex, but an entrepreneur can conduct the trademark search personally by using the Trademark Search Library of the United States Patent and Trade Office. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-6 The Legal Environment QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 27. Channel management is synonymous with the term logistics. a. True b. False ANSWER: False RATIONALE: The activities involved in physically moving products are called physical distribution or logistics. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 28. Distribution includes only the physical movement of products. a. True b. False ANSWER: False POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 29. Distribution is essential for tangible products, but not for intangible products. a. True b. False ANSWER: False RATIONALE: Distribution is essential for both tangible and intangible goods. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 30. Shippers that own their own means of transport are called private carriers. a. True b. False ANSWER: True RATIONALE: Shippers that own their own means of transport are called private carriers. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM Copyright Cengage Learning. Powered by Cognero.

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31. Delivery terms include paying the freight costs, selecting the carriers, bearing the risk of damage in transit, and selecting the modes of transport. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 32. F.O.B. origin, freight collect, is a delivery term that shifts all responsibility for freight costs to the buyer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic STATE STANDARDS: United States - AK - DISC: Ethical and Legal United States - IN - DISC: Operations Management TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 33. Using 3PLs is considered more cost effective by many small businesses because it allows them to focus on their primary operations and outsource the accounting challenges to another company. a. True b. False ANSWER: False RATIONALE: Third-party logistics firms provide transportation and distribution services to firms that prefer to focus their efforts on other business aspects. POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 34. A direct channel of distribution is one that involves only one intermediary. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 35. The three main considerations in evaluating a channel of distribution are costs, coverage, and customer service. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM Copyright Cengage Learning. Powered by Cognero.

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36. Physical distribution of products includes only transportation. a. True b. False ANSWER: False RATIONALE: Transportation is the main component of physical distribution—additional components include storage, materials handling, delivery terms, and inventory handling. POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 37. Successful growth a. happens on its own. b. occurs only when a number of factors are carefully considered and well managed. c. should be easy if the owner has the correct management style. d. will keep most business functions the same, just larger in scope. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 38. Thanks to the national press, Wonderful Gifts has had 100 percent more orders placed in this quarter than in the last quarter. The company could be caught in a _____ if proper planning does not occur. a. growth net b. growth trap c. profit net d. profit trap ANSWER: b POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 39. Which of the following statements is true about company growth? a. Successful growth occurs on its own. b. A high-growth firm's need for additional financing may exceed its available resources, even though the venture is profitable. c. Inventory needs will increase while account receivables will decrease with growth. d. While rapid growth may stress personnel, the increase in pay will be sufficient. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:31 PM 40. Which of the following statements is correct concerning the role of innovation for small businesses? a. Fortune magazine reports that 93 percent of company founders indicated that their business turned out to be nothing like their original venture concept. b. Studies have shown that small entrepreneurial firms produce 95 percent as many innovations per employee as large firms. c. According to Clayton Christensen, 60 percent of all new products end up failing or performing well below expectations. d. Small entrepreneurial firms produce twice as many innovations per employee as large firms. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 41. Annabelle's company makes pottery. She would like to expand her business and is looking for ideas. Which of the following would you advise her to do? a. Think outside the box; go into a completely different line of products. b. Pursue innovation that customers will perceive as adding excitement to their lives. c. Base innovative efforts on her experience. d. Focus on products or services offered by her largest competitors. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking STATE STANDARDS: United States - IN - DISC: Strategy TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 42. A sustainable competitive advantage is a. rarely appreciated by the firm's owners. b. of little consequence to profitability. c. an idealized position that is unachievable in reality. d. a value-creating industry position that is likely to endure over time. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM Copyright Cengage Learning. Powered by Cognero.

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43. Joe has redesigned an app that helps businesses organize their taxes after a rival gained market share. The IRS and the Society of Certified Public Accountants have said the app meets tax standards. The app would be considered a(n) a. sustainable competitive advantage. b. strategic alliance. c. competitive adjustment. d. business process reengineering. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 44. Before a company’s competitive advantage moves into the decline stage, it should a. invest resources to develop a competitive advantage. b. continue deploying the competitive advantage as long as it can. c. slow the decline as much as possible. d. implement previously developed plans for the hidden curves. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 45. If a small firm is to maintain its performance over time, it is most essential to a. continue to reinvent itself. b. extend the competitive advantage of the firm. c. replicate the strategies that have led to success in the past. d. retain the personnel who made the firm successful in the first place. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 46. To maintain performance, a small business must launch a new competitive advantage a. and keep that competitive advantage alive. b. and make adjustments to that competitive advantage over time. c. that causes rival firms to respond. d. before the current strategy has run its course. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 47. High-performing companies a. adjust strategies for changing customer needs before rivals. b. downgrade capabilities as competitive advantages move into the decline stage. c. hire people to drive new growth once the growth is identified. d. All of these are completed by high-performing firms. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 48. The product life cycle, as opposed to the competitive advantage life cycle, a. helps an entrepreneur to visualize the sales and profits of a product from the time it is introduced until it is no longer on the market. b. details when a strength can be used in the market and when not to attack a rival. c. reflects sales trends for the company's multiple products or services. d. is based on the overall sales of the total product or service line. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:34 PM 49. The profit curve is the lowest in which of the following stages of the product life cycle? a. Decline b. Growth c. Introduction d. Maturity ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:35 PM Copyright Cengage Learning. Powered by Cognero.

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50. Products must be carefully analyzed in terms of financial considerations in the _____ stage of the new product development process. a. business analysis b. idea accumulation c. product testing d. development of the physical product ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 51. The business analysis stage of the new product development process is critical because a. one to three years may pass before profits are realized on the sale of a new product. b. it is hard to attract the 10 percent of the total market that is needed for a new product success. c. products often fail in laboratory and marketing testing. d. All of these support the importance of the business analysis stage. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 52. Arden has designed an artistic symbol to complement his product's name to assist customers in identifying his product. These symbols are commonly referred to as a. brand. b. trademark. c. service mark. d. trade dress. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-4 Building the Total Product QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 53. Which of the following brands generates trust in the minds of buyers by conveying to them a sense of happiness? a. Amazon b. Apple c. Nordstrom d. Coca-Cola ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 54. Beatrice is contemplating whether to offer a warranty on her product. She should remember that warranties are important for products a. that are relatively inexpensive. b. that are frequently purchased. c. that are relatively complex to repair. d. regardless of how they are positioned in the market. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

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55. Judy is opening a small business that will produce high-quality paper products and has decided to place a green pine tree on all product boxes and on the sign outside the facilities to symbolize the business. At this point, the symbol is an example of a a. brandmark. b. brand name. c. service mark. d. trademark. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 56. A legal term indicating that a firm has exclusive rights to use a brand to represent a product is a a. copy mark. b. trademark. c. service mark. d. trade dress. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM Copyright Cengage Learning. Powered by Cognero.

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57. PepsiCo produces and distributes products under the brand names Pepsi, Quaker, Frito-Lay, and many others. This collection of product lines within PepsiCo's ownership and control is referred to as the a. product depth. b. product accumulation. c. product line consistency. d. product mix. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 58. When a product mix has more product lines, it has greater a. breadth. b. consistency. c. depth. d. lines. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 59. Carrigan has just launched his new business. He has great plans for expansion later, but the most appropriate and effective product strategy to use in this stage of his small business is the _____ product strategy. a. one product/one market b. one product/multiple markets c. multiple products/one market d. The strategy depends on the product or service. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 60. Furniture Shine is introducing an improved version of its existing wax targeted to owners of antiques. The firm has decided to leave the original wax in the mix aimed toward residential owners. Furniture Shine is employing a _____ product strategy. a. multiple products/one market b. multiple products/multiple markets c. modified product/one market d. modified product/multiple markets ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 61. Bagels Bagels Bagels, a small breakfast bagel bakery, has expanded into sandwiches for lunch using bagels. It is now employing a _____ product strategy. a. one product/one market b. one product/multiple markets c. modified product/one market d. modified product/multiple markets ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 62. Love Languages is introducing an improved version of its tutoring targeted to students who want more in-depth assistance using an online format. The company has decided to continue to offer its original tutoring package and aim the new product at the original target market; therefore, it is employing a _____ product strategy. a. multiple products/one market b. multiple products/multiple markets c. modified product/one market d. modified product/multiple markets ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 63. A product strategy that includes adding an unrelated product to the mix a. can be more challenging to manage. b. is often used by small businesses. c. will likely determine the future direction of the firm. d. is encouraged, as long as it represents no more than half of the firm's product offerings. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-5 Product Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

12/19/2018 8:45 PM

64. Erica has registered protection for 20 years that covers a new process she has designed. Erica owns a a. design patent. b. plant patent. c. utility patent. d. trademark. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-6 The Legal Environment QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 65. A copyright provides protection for the duration of the creator's life, plus a. 25 years. b. 70 years. c. 75 years. d. 100 years. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-6 The Legal Environment QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 66. The distinctive operating image of a product, including features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques, can be protected a. by copyright. b. by patent. c. as trade dress. d. as a registered concept. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-6 The Legal Environment QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 67. Eugenie has written a poem that she plans to print inside the greeting cards she will publish. Her work is automatically protected, but which of the following should Eugenie include on the back of her greeting cards? a. The symbol © b. The date the work was published c. The name of the copyright owner's company d. A listing of all other copyrights held by the owner ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-6 The Legal Environment QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 68. Which of the following intermediaries take ownership of the goods they distribute? a. Agents b. Brokers c. Merchant middlemen d. Supply chain managers ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 69. Both the physical movement of products and the establishment of intermediary relationships to support such movement are included in a. channels. b. distribution. c. intermediaries. d. logistics. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 70. The activities involved in physically moving a product are called a. channel management. b. channel of distribution. c. logistics. d. supply chain management. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM Copyright Cengage Learning. Powered by Cognero.

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71. Intermediaries exist because a. they provide more efficient means of distribution than the product producer. b. they are able to reach geographic areas with much less expense. c. they have lower risk levels since they don't have ownership of the goods. d. they specialize in products for specific customer needs. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 72. Franklin sells his product in a brick-and-mortar store and online. Franklin is using a. channel integration. b. dual distribution. c. intermediary replication. d. multiple distribution. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 73. Cooking for Collin, a small manufacturer of holiday cakes, sells its product through independent retailers and mailorder marketing. Cooking for Collin is relying on a(n) a. direct channel of distribution. b. indirect channel of distribution. c. dual distribution channel. d. multiple-outlet distribution channel. ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 74. Since Love Languages has decided to sell its tutoring service on DVDs through an online site as well as the traditional format of personal tutors, it is relying on a(n) a. direct channel of distribution. b. indirect channel of distribution. c. dual distribution channel. d. multiple-outlet distribution channel. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 75. The three main considerations in evaluating a channel of distribution are a. costs, coverage, and control. b. costs, coverage, and compatibility. c. coverage, control, and compatibility. d. costs, control, and compatibility. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Remember 8/29/2018 11:25 AM 12/19/2018 8:45 PM

76. Small businesses should view distribution costs as a. prohibitive. b. sunk costs. c. an investment. d. a necessary evil. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 77. Buzz-Buzz Express is a small firm that sells honey bees domestically. Once purchased, the bees are flown to the purchaser using FedEx. Buzz-Buzz Express uses a a. common carrier. b. public carrier. c. private carrier. d. contract carrier. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 78. When Gavin sells his product to _____, the storage function is transferred to the intermediary. a. agents Copyright Cengage Learning. Powered by Cognero.

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b. brokers c. common carriers d. wholesalers ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 79. How can a successfully growing firm fall into a growth trap? How can a successfully growing firm fall into a growth tra ANSWER: Successful growth seldom happens on its own; it occurs only when a number of factors are carefully considered and well managed. When a business experiences rapid growth in sales volume, its income statements will generally reflect growing profits. However, rapid growth in sales and profits may be hazardous to the company's cash flows. A growth trap can occur because growth tends to demand additional cash faster than it can be generated in the form of increased profits. Inventory, for example, must be expanded as sales volume increases. Additional dollars must be spent on merchandise or raw materials to accommodate the higher level of sales. Similarly, accounts receivable must be expanded proportionately to meet the increased sales volume. A profitable business can quickly find itself in a financial bind, growing while its bank accounts dwindle. The growth problem is particularly acute for small companies. Increasing sales by 100 percent is easier for a small venture than for a Fortune 500 firm, but doubling sales volume makes an enterprise a much different business. Combined with difficulty in obtaining external funding, this may have unfavorable effects if cash is not managed carefully. In short, a high-growth firm's need for additional financing may exceed its available resources, even though the venture is profitable. Without additional resources, the company's cash balances may decline sharply, leaving it in an uncertain financial position. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:36 PM Copyright Cengage Learning. Powered by Cognero.

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80. Compare innovation in small businesses to innovation in large firms. Provide some examples of successful innovations by small entrepreneurial firms. ANSWER: Small entrepreneurial firms produce twice as many innovations per employee as large firms, accounting for half of all those created and an amazing 95 percent of all radical innovations. Students' examples of innovations will vary. Some widely recognized examples of small firm innovations as listed in the text include soft contact lenses, the zipper, overnight delivery services, the personal computer, and social media services like Facebook. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-1 To Grow or Not to Grow QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.01 - LO: 15-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 81. Patricia has developed a new product that she would like to patent and produce. What can she do to reduce the risk of failure? ANSWER: • Base innovative efforts on experience. Innovative efforts are more likely to succeed if Patricia knows something about the product or service technology. • Focus on products or services that have been largely overlooked. Patricia is more likely to strike "pay dirt" in a vein that has not already been fully mined and in which competitors are few. • Validate the market before jumping in with both feet. A new product or service will invariably fail if the pool of potential customers is too shallow to generate sufficient sales to recover its cost of innovation, along with a reasonable profit. • Pursue innovation that customers will perceive as adding value to their lives. Patricia should understand it is not enough to create a product or service that she believes in. People become customers when they believe her product or service will provide value they cannot find elsewhere. • Focus on new ideas that will lead to more than one product or service. Success with an initial product or service is critical, but investment in innovation packs even more of a punch when it also leads to other innovative products or services. • Raise sufficient capital to launch the new product or service. Formal investors want to see at least a working prototype, and preferably a developed product, before they invest in a new venture. To get to that point, Patricia will most likely need to rely on more informal sources of capital, such as personal savings and investments from family and friends. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 82. Ollie has developed a new product for radio that allows the listener to rewind and listen to songs or dialogue that was missed. The listener can then resume play in live mode, similar to a DVR product used on home TVs. Ollie knows his competitive advantage will dwindle over time as new technology emerges. What can he do to secure the future of his product and himself as an innovator? ANSWER: Ollie needs to develop a sustainable competitive advantage, a value-creating position that is likely to endure over time. To incorporate sustainability into his business strategy, Ollie should use the unique capabilities of the firm and his product in a way that competitors will find difficult to imitate. However, since rivals will discover a way to copy any value-creating strategy sooner or later, it is important to think about and plan for its transformation over the long run. Ollie and his firm are more likely to avoid a slump if he keeps a close eye on "hidden curves" related to the firm's competition, its internal capabilities, and its people—and takes corrective measures before these hidden trends become apparent in the company's financial results. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-2 Innovation: A Path to Growth QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking STATE STANDARDS: United States - IN - Creation of Value United States - IN - DISC: Strategy United States - AK - DISC: Value Creation TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 83. Holley and Ellison are sisters whose parents started a stable 15 years ago boarding pleasure horses. The parents want the sisters to take over the operation, because they would like to retire and the business is starting to suffer. What could the sisters do to move the company out of the decline stage of the product life cycle? ANSWER: The competitive advantage of products and services that are on the verge of decline can be reinvigorated by using any number of different strategies, including the following: • • • •

Modifying the product or service by adding new features. (Add riding lessons.) Proposing alternative uses. (Have the facility be available for birthday parties, summer camps or as a corporate meeting site for employee bonding.) Expanding into complementary products. (Work with a physical therapist for riding to be used by patients.) Redefining the business. (Use the facility as an internship site for people who want to gain knowledge of the industry.)

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Students are likely to offer suggestions specific to this situation rather than the generic ideas expressed here. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 84. Josiah has developed an avalanche safety kit that includes a small but powerful locator beacon. When he developed and researched the idea, he found other kits on the market but his business analysis revealed a less expensive way of producing the kits. How should he proceed? ANSWER: Josiah now needs to complete product testing, which will determine if his product is acceptable (safe, effective, durable, etc.). The kits should be tested in the market to gauge consumer reaction. From the results, he may change his prototype. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 85. Austin has developed a new USB-powered universal remote control for TVs. He is trying to think of a name for his product. What suggestions for naming products can you offer Austin? ANSWER: In general, six rules apply in naming a product: 1. 2. 3. 4. 5. 6.

POINTS: DIFFICULTY:

Select a name that is easy to pronounce and remember. Choose a descriptive name. Use a name that is eligible for legal protection. Select a name with promotional possibilities. Select a name that can be used on several product lines of a similar nature. In cases where online presence is crucial, consider the cost of domain name acquisition.

1 Hard

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REFERENCES: 15-4 Building the Total Product QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 86. Discuss the purposes of packaging, labeling and warranties in relation to a company’s product. ANSWER: In addition to protecting the basic product, packaging is a significant tool for increasing the value of the total product. Innovative packaging is often the deciding factor for consumers. If two products are otherwise similar, packaging may create the distinctive impression that makes the sale. Labeling serves several important purposes for manufacturers, which apply most labels. One purpose is to display the brand, particularly when branding the basic product would be undesirable. A label is also an important informative tool for consumers. It often includes information on product use and care and may even provide instructions on how to dispose of the product. A warranty is simply a promise, written or unwritten, that a product will do certain things or meet certain standards. Warranties are important for products that are innovative, comparatively expensive, purchased infrequently, relatively complex to repair, and positioned as high-quality goods. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-4 Building the Total Product QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic STATE STANDARDS: United States - IN - DISC: Legal Responsibilities United States - AK - DISC: Value Creation TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:38 PM 87. List the six categories of major product strategies, and discuss the implications for a small business. ANSWER: The major product strategy alternatives of a small business can be condensed into six categories, based on the nature of the firm's product offering and the number of target markets: 1. One product/one market 2. One product/multiple markets 3. Modified product/one market Copyright Cengage Learning. Powered by Cognero.

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4. Modified product/multiple markets 5. Multiple products/one market 6. Multiple products/multiple markets Each alternative represents a distinct strategy, although two or more of these strategies can be attempted at the same time. However, a small company will usually pursue the alternatives in the order listed. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-5 Product Strategy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.05 - LO: 15-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 88. What are the four key factors that should be considered in conducting a business analysis? ANSWER: The following four key factors should be considered in conducting a business analysis: 1. The product's relationship to the existing product line. In most cases, an added product item or line should be somehow related to the existing product mix. If the product is completely new, it should have at least a family relationship to existing products to save on costs of manufacturing, distribution, promotion, and/or sales strategy. 2. Cost of development and introduction. Considerable capital outlays may be necessary when adding a new product. These include expenditures for design and development, marketing research to establish sales potential, advertising and sales promotion, patents, and additional equipment. One to three years may pass before profits are realized on the sale of a new product. 3. Available personnel and facilities. Having adequate skilled personnel and sufficient production capabilities is preferable to having to add employees and buy equipment. Thus, introducing new products is typically more appealing if the personnel and the required equipment are already available. 4. Competition and market acceptance. The potential competition facing a proposed product in its target market must not be too severe. It has been suggested that a new product can be introduced successfully only if 5 percent of the total market can be secured. The ideal solution is to offer a product that is sufficiently different from existing products or that is in a price bracket where it avoids direct competition. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Strategy Bloom’s: Understand 8/29/2018 11:25 AM 12/19/2018 8:45 PM

89. Marie is a songwriter who has a full catalogue of material she has been compiling as a hobby since 1985. Recently, she was approached about someone recording her songs. To protect her rights to her songs, what does Marie need to do to secure her rights? ANSWER: Because Marie's writing is considered intellectual work, she needs to file copyrights on her work to issue her the exclusive right as creator to reproduce, publish, perform, display, or sell her work. Since her work was created after January 1, 1978, she will receive copyright protection for the duration of her life plus 70 years. She needs to register her copyright with the U.S. Copyright Office of the Library of Congress and also display a copyright notice on her material consisting of three elements: (1) the symbol ©, (2) the year the work was published, and (3) her full name. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-6 The Legal Environment QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 90. How can a small business protect its marketing assets? ANSWER: Four primary means are used by firms to protect certain proprietary assets: 1. Trademarks. Trademark or service mark protection safeguards a company's distinctive use of a name, word, phrase, slogan, symbol, design, logo, picture, or any combination of these. In essence, trademarks or service marks represent the way people identify a business. Potential names should be investigated carefully to ensure that they are not already in use. 2. Patents. A patent is the registered, exclusive right of an inventor to make, use, or sell an invention. The two primary types of patents are utility patents and design patents. A utility patent covers the discovery or improvement of a new and useful process, machine, manufactured product, or "composition of matter." A design patent covers the appearance of a product and everything that is an inseparable part of the product. Utility patents are granted for a period of 20 years, while design patents are effective for 14 years. Patent law also provides for plant patents, which cover the invention or discovery and reproduction of any distinct, new variety of living plant. 3. Copyrights. A copyright is the exclusive right of a creator (such as an author, composer, designer, photographer, or artist) to reproduce, publish, perform, display, or sell work that is the product of that person's intelligence and skill. Works created on or after January 1, 1978, receive copyright protection for the duration of the creator's life plus 70 years. A "work made for hire" (work created by an employee for an employer) is protected for 95 years from its publication or 120 years from its Copyright Cengage Learning. Powered by Cognero.

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creation, whichever is shorter. Under the Copyright Act of 1976, copyrightable works are automatically protected from the moment of their creation. However, any work distributed to the public should contain a copyright notice. This notice consists of three elements: (1) the symbol ©, (2) the year the work was published, and (3) the copyright owner's name. 4. Trade dress. Trade dress describes those elements of a firm's distinctive operating image not specifically protected under a trademark, patent, or copyright. Trade dress is the "look" that a firm creates to establish its marketing advantage. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-6 The Legal Environment QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 91. List and briefly describe the stages of the new product development process. ANSWER: The new product development process consists of the following four stages: 1. Idea accumulation. This stage involves increasing the pool of ideas under consideration. 2. Business analysis. Business analysis requires that every new product idea be carefully studied in relation to several financial considerations. Costs and revenues are estimated and analyzed with techniques such as break-even analysis. Any idea failing to show that it can be profitable needs to be discarded. 3. Development of the physical product. This stage entails sketching out the plan for branding, packaging, and other supporting efforts, such as pricing and promotion. But before getting to that point, an actual prototype (usually a functioning model of the proposed new product) may be needed. After these components have been evaluated, the new product idea may be judged a misfit and discarded, or it may be moved to the next stage for further consideration. 4. Product testing. The last step in the product development process should determine whether the physical product is acceptable (safe, effective, durable, etc.). While the product can be evaluated in a laboratory setting, a limited test of market reaction should also be conducted. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-3 The Product Life Cycle and New Product Development QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.03 - LO: 15-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Strategy Bloom’s: Analyze 8/29/2018 11:25 AM 12/19/2018 8:45 PM

92. How can intermediaries impact a company's supply chain? ANSWER: Intermediaries can often perform marketing functions better than the producer of a product can. While the producer can handle its own distribution operations if the geographic area of the market is small, customers' needs are specialized, and risk levels are low, intermediaries generally provide more efficient means of distribution if customers are widely dispersed or if special packaging and storage are needed. Merchant middlemen take ownership of the goods they distribute, thereby helping a company to share or shift business risk. Agents or brokers do not take title to goods and, therefore, assume less market risk than do merchant middlemen. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 93. Discuss three considerations in evaluating a channel of distribution. ANSWER: The three main considerations in evaluating a channel of distribution are as follows: 1. Costs. Small companies should look at distribution costs as an investment—spending money in order to make money—and ask themselves whether the cost of using intermediaries (by selling the product to them at a reduced price) is more or less expensive than distributing the product directly to customers. 2. Coverage. Small businesses can often use indirect channels of distribution to increase market coverage. 3. Control. A direct channel of distribution is sometimes preferable because it provides more control. To ensure that the product is marketed with care, an entrepreneur must deliberately select intermediaries that provide the desired support. POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Understand 8/29/2018 11:25 AM 12/19/2018 8:45 PM

94. Sandra, after attending culinary school, has returned home to start a small French restaurant using sustainable, local items as well as foods and wines from France. What type of distribution would she have and who would belong at what level? ANSWER: Sandra would use indirect channels. The levels would include: • • • • •

Producers: local farmers, French farmers, French wineries (if buying direct) Agents/Brokers: those who import items (if indirect purchases are made) Wholesalers: restaurant supply companies Retailer: Sandra's French restaurant Consumers: those who visit the restaurant Consumers: those who visit the restaurant

POINTS: 1 DIFFICULTY: Hard REFERENCES: 15-7 Supply Chain Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:39 PM Match the term with its definition. a. brand b. brand image c. brandmark d. brand name e. design patent f. direct channel g. indirect channel h. service mark i. trade dress j. trademark k. utility patent l. warranty DIFFICULTY: Easy REFERENCES: 15-4 Building the Total Product 15-6 The Legal Environment 15-7 Supply Chain Management Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.04 - LO: 15-4 SMAL.LONG.20.15.06 - LO: 15-6 SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Legal Responsibilities Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 8:41 PM 95. The overall perception of a brand ANSWER: b POINTS: 1 96. A distribution system without intermediaries ANSWER: f POINTS: 1 97. A legal term indicating that a company has the exclusive right to use a brand to represent a service ANSWER: h POINTS: 1 98. Registered protection for the appearance of a product and its inseparable parts ANSWER: e POINTS: 1 99. A legal term indicating that a firm has exclusive rights to use a brand to represent a product ANSWER: j POINTS: 1 100. A verbal and/or symbolic means of identifying a product ANSWER: a POINTS: 1 101. Registered protection for a new or improved process, machine, manufactured product, or "composition of matter" ANSWER: k POINTS: 1 102. A brand that cannot be spoken; a company logo ANSWER: c POINTS: 1 103. Elements of a firm's distinctive image not protected by a trademark, patent, or copyright ANSWER: i POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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104. A distribution system with one or more intermediaries ANSWER: g POINTS: 1 105. A brand that can be spoken ANSWER: d POINTS: 1 Match the term with its definition. a. agents/brokers b. common carriers c. contract carriers d. distribution e. dual distribution f. merchant middlemen g. physical distribution (logistics) h. plant patent i. private carriers j. supply chain management k. third-party logistics firm (3PLs) DIFFICULTY: Easy REFERENCES: 15-6 The Legal Environment 15-7 Supply Chain Management QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.06 - LO: 15-6 SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 106. The activities of distribution involved in the physical relocation of products ANSWER: g POINTS: 1 107. Transportation intermediaries that contract with individual shippers ANSWER: c POINTS: 1 108. Lines of transport owned by shippers ANSWER: i POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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109. A distribution system that involves more than one channel ANSWER: e POINTS: 1 110. Companies that provide transportation and distribution services to firms that prefer to focus their efforts on their primary operations ANSWER: k POINTS: 1 111. Intermediaries that do not take ownership of the goods they distribute ANSWER: a POINTS: 1 112. A system of management through which a company integrates and coordinates the flows of materials and information needed to produce a product or service and deliver it to customers ANSWER: k POINTS: 1 113. The physical movement of products and the establishment of intermediary relationships to support such movement ANSWER: d POINTS: 1 114. Registered protection for any distinct, new variety of living plant ANSWER: h POINTS: 1 115. Transportation intermediaries available for hire to the general public ANSWER: b POINTS: 1 Match the term with its definition. a. channel of distribution b. copyright c. patent d. product e. product item f. product life cycle g. product line h. product mix i. product mix consistency j. product strategy k. sustainable competitive advantage DIFFICULTY: Easy REFERENCES: 15-2 Innovation: A Path to Growth 15-3 The Product Life Cycle and New Product Development 15-5 Product Strategy 15-6 The Legal Environment 15-7 Supply Chain Management Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.15.02 - LO: 15-2 SMAL.LONG.20.15.03 - LO: 15-3 SMAL.LONG.20.15.05 - LO: 15-5 SMAL.LONG.20.15.06 - LO: 15-6 SMAL.LONG.20.15.07 - LO: 15-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Legal Responsibilities Operations Management Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/19/2018 8:45 PM 116. The lowest common denominator in the product mix—the individual item ANSWER: e POINTS: 1 117. The similarity of product lines in a product mix ANSWER: i POINTS: 1 118. The system of relationships established to guide the movement of a product ANSWER: a POINTS: 1 119. A value-creating position that is likely to endure over time ANSWER: k POINTS: 1 120. The collection of a firm's total product lines ANSWER: h POINTS: 1 121. A total bundle of satisfaction—whether a service, a good, or both—offered to consumers in an exchange transaction ANSWER: d POINTS: 1 122. The sum of related individual product items ANSWER: g POINTS: 1 123. The way in which the product component of the marketing mix is used to achieve a firm’s objectives ANSWER: j POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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124. The registered, exclusive right of an inventor to make, use, or sell an invention ANSWER: c POINTS: 1 125. A detailed picture of what happens to a specific product's sales and profits over time ANSWER: f POINTS: 1

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Chapter 16 - Pricing and Credit Decisions 1. Pricing is not an exact science. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 2. The best pricing practice is to undercut competitors' prices. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-0 Pricing and Credit Decisions QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.00 - LO: 16-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 3. Profit should always be at the heart of a pricing strategy. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.00 - LO: 16-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Strategy Bloom's: Understand 8/29/2018 11:25 AM 12/26/2018 6:41 PM

4. Setting a price too high for the value being offered may result in lower quantities sold, reducing total revenue. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 5. Marketing expenses, factory equipment costs, and salaries of office personnel are considered variable costs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 6. Average pricing is an appropriate pricing approach for small businesses because the method takes into consideration both fixed and variable costs. a. True b. False ANSWER: False POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 7. On rare occasions, pricing at less than total cost can be used as a special short-term strategy. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 8. Cost analysis can identify a level below which a price should not be set under normal circumstances. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM Copyright Cengage Learning. Powered by Cognero.

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9. If demand for a product is elastic, a change in price will have little effect on total revenues. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 10. Prestige pricing (setting a high price to convey an image of high quality or uniqueness) is a pricing tactic that reflects competitive advantage. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 11. In conducting a comprehensive break-even analysis, a firm must examine its cost-revenue relationships and incorporate sales forecasts into the analysis. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 12. Break-even analysis begins by determining what sales volume level is needed to generate a profit. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 13. Markup rates should be high enough to cover variable costs, any price reductions, and the desired profit. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 14. Markups may be expressed as a percentage of either the firm's cost or the industry-standard cost. a. True b. False ANSWER: False POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 15. Break-even analysis is an accurate tool for pricing because it points directly to the correct price for a given product. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 16. A penetration price strategy is most practical when there is a low threat of short-term competition in the market or when startup costs must be recovered rapidly. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM Copyright Cengage Learning. Powered by Cognero.

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17. With a price skimming strategy, prices are set lower than what will be the normal, long-range market price to gain more market share. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 18. A small business in competition with larger firms is seldom in a position to function as a price leader. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 19. A variable pricing strategy occurs where a business sets and advertises a fixed price but gives a discount for various reasons, such as the customer's amount purchased. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 20. Price lining refers to the systematic determination of the right price for a product or service. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 21. The Sherman Antitrust Act generally prohibits price fixing. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 22. Local, state, and federal laws must be considered in setting prices. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 23. If a small business has products that compete with one another, pricing decisions must take into account the effects of a single product price on the rest of the line. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 24. One of the benefits of extending credit to buyers is that doing so provides better records of purchases on credit billing statements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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25. Sellers benefit from offering credit to borrowers because it helps to establish a credit history. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 26. Because it is a standard practice for many types of businesses, selling on credit cannot often be avoided. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 27. In today's competitive environment, a cash-only seller will outsell a credit-selling competitor. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 28. Home-based businesses will find it easy to obtain merchant status with individual credit card companies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 29. Collateral is generally required for open charge accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 30. An installment account is a typical trade credit agreement. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 31. A revolving charge account would be typical for larger purchases; smaller purchases are typical on installment accounts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 32. Bank credit cards are widely accepted by retailers that want to offer credit but don't provide their own credit cards. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM Copyright Cengage Learning. Powered by Cognero.

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33. A JCPenney card is an example of a retailer credit card. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 34. Credit cards are an alternative to cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 35. Trade credit is extended to consumers purchasing large volumes of products. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 36. In many lines of business, trade credit terms are so firmly set by tradition that a unique policy is difficult for a small firm to implement. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 37. Fees that credit card companies charge small businesses can cut into their profits significantly. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 38. For installment selling, the amount of credit should not exceed the repossession value of the goods sold. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 39. Every applicant is creditworthy to some degree. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 40. An important source of credit information is the customer's previous credit history. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM Copyright Cengage Learning. Powered by Cognero.

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41. Trade-credit agencies collect credit information on business firms and consumers in a given area. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 42. Credit bureaus maintain credit histories on individuals, based on reports from banks, mortgage companies, department stores, and other creditors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 43. The aging schedule is a categorization of accounts receivable based on the length of time they have been outstanding. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 44. To ensure prompt payment, a business extending credit should have adequate billing records and collection procedures. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 45. The bad-debt ratio is the ratio of bad debts to total sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 46. The Consumer Credit Protection Act requires that a finance charge be stated as an annual percentage rate and that creditors specify their procedures for correcting billing mistakes. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 47. The primary purposes of the Equal Credit Opportunity Act are to inform consumers about terms of a credit agreement and to require creditors to specify how finance charges are computed. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 48. The measure of what a seller requires for giving up ownership or use of a product or service is a. credit. b. average pricing. c. demand. d. price. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-0 Pricing and Credit Decisions QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.00 - LO: 16-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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49. The total sales revenue of a small business is a direct reflection of a. sales volume and credit terms. b. price and credit terms. c. price and expenses. d. sales volume and price. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 50. A business will not be successful unless it charges a price for its products that covers its total a. cost and a margin of profit. b. cost of goods and selling cost. c. fixed cost and operating expense. d. variable cost and cost of goods. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 51. Commissions paid to a salesperson would be included in a. cost of goods sold. b. human resources. Copyright Cengage Learning. Powered by Cognero.

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c. operating expenses. d. administrative costs. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 52. Active Feet, a small manufacturer of shoes, hired an additional vice president and purchased a barrel of synthetic rubber used to make shoe soles. These two expenses should be considered a(n) _____ and a(n) _____, respectively. a. selling cost; cost of goods sold b. operating expense; cost of goods sold c. selling cost; operating expense d. operating expense; selling cost ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 53. In general, products that are consumed in fixed amounts, regardless of price, have a. constant demand. b. elastic demand. c. inelastic demand. d. variable demand. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 54. Hollywood Amusement, a small independent movie theater, decreased the price of admission from $10 to $9. Prior to the price decrease, the business sold 1,000 tickets each month. After the price decrease, it experienced ticket sales of 1,500 a month. If the change in sales is attributable only to the change in price, Hollywood Amusement faces _____ for its movie tickets. a. elastic demand b. constant demand c. inelastic demand d. variable demand ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 55. Diamonds and other jewels often carry a high price to convey an image of high quality or uniqueness. This type of pricing is known as a. price skimming. b. penetration pricing. c. variable pricing. d. prestige pricing. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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56. If the owner of Clarisa's Fine Jewelry instructed the sales team to stress the uniqueness of the store's hand-designed jewelry, a _____ pricing strategy would be expected. a. skimming b. prestige c. follow-the-leader d. dynamic ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-1 Setting a Price QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 57. Beverly is systematically comparing various cost and revenue estimates in order to determine the acceptability of alternative prices. Beverly is using a. break-even analysis. b. price lining. c. cost functioning. d. demand functioning. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 58. The difference between the unit selling price and the unit variable costs and expenses is known as the Copyright Cengage Learning. Powered by Cognero.

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a. average price. b. elasticity. c. contribution margin. d. break-even point. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 59. A comprehensive break-even analysis entails a. examining cost-revenue relationships and incorporating sales forecasts into the analysis. b. analyzing marketing strategy's effect on revenue and costs. c. the use of comparison pricing and contribution margins. d. approximating debits, credits, costs and sales. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 60. Markup pricing may be expressed in terms of a percentage of either the _____ or the cost. a. quantity b. operating expenses c. selling price d. estimated expenses ANSWER: c POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 61. Within the framework of a break-even analysis, an examination of _____ is conducted to determine the quantity at which the product, with an assumed price, will generate enough revenue to start earning a profit. a. costs b. revenues c. sales forecasts d. costs and revenue ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 62. Demand for a product typically _____ as price _____. a. decreases; increases b. decreases; stays the same c. stays the same; increases d. increases; decreases ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Copyright Cengage Learning. Powered by Cognero.

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63. Fine Framings, a small framing shop, uses markup pricing to arrive at a final selling price. The firm sells its frames at a price of $25, given a $15 unit cost. Fine Framings' markup on the selling price is _____, and its markup on cost is _____. a. 66 2/3 percent; 40 percent b. 40 percent; 66 2/3 percent c. 167 percent; 67 percent d. 250 percent; 100 percent ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 64. Tick Tock, a small retailer of a quality alarm clock, sells its product based on a 35 percent markup of cost. If the firm's product costs are approximately $133, what is the selling price? a. $138 b. $198 c. $180 d. $289 ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 65. Golf Global Company sells 1,000 shirts annually at a price of $35 each. If the company's pricing policies adhere to a 40 percent markup of selling price, the cost of each shirt is Copyright Cengage Learning. Powered by Cognero.

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a. $14. b. $21. c. $28. d. $32. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 66. Tanya would like to gain market share rapidly so she has priced her product at a lower than normal, long-range market price. Which of the following strategies is Tanya using? a. Variable pricing b. Price skimming c. Price lining d. Penetration pricing ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 67. Chocolate Concoctions, a maker of high-end chocolate candies, decided to price its boxes of candies below the longterm market price. The decision was made to increase market share and discourage other firms from entering the chocolate market. Chocolate Concoctions was implementing a a. penetration pricing strategy. b. price lining strategy. c. price skimming strategy. d. variable pricing strategy. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 68. A business that has a gaming console intended to compete directly with Sony's PlayStation gaming console would likely use a _____ pricing strategy. a. follow-the-leader b. penetration c. prestige d. variable ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 69. Troy Bourbon, a local bourbon distillery, initially sold its product at a premium price of $45 because the company believed consumers would view the bourbon as a prestige item. The company decided that when startup costs had been fully recovered and competition became imminent, the company would reduce the price to $30 which was more expected in the market. The distillery is using a a. variable pricing strategy. b. price skimming strategy. c. price lining strategy. d. penetration pricing strategy. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 70. Retro Hits, a local band covering songs from the 1980s and 1990s, decided they wanted to expand to more college students. Research showed students thought the current $25 ticket price was too high for a local band. To strengthen ticket demand, Retro Hits began offering $15 tickets to all fans who checked in on Facebook. The band was using a a. variable pricing strategy. b. price lining strategy. c. price skimming strategy. d. freemium pricing strategy. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 71. Lorrie Veasey, owner of All That Swag, used discount coupons for special event items to drive customers to her retail stores. Using such promotions and stating that "the regular price is never chiseled in stone" would indicate Lorrie is using a a. variable pricing strategy. b. price lining strategy. c. price skimming strategy. d. product line pricing strategy. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Strategy Bloom's: Apply 8/29/2018 11:25 AM 12/26/2018 6:41 PM

72. For a price lining strategy, a company's inventory levels for each line will depend directly on the _____ of the customers. a. buying desires and income level b. personal demographics c. creditworthiness d. product awareness ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 73. Walmart grants credit to consumers who purchase for personal or family use. This type of credit is called a. trade credit. b. personal credit. c. open credit. d. consumer credit. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 74. Richard is an independent contractor and buys materials from a local builders supply store. He takes possession of the products immediately and the store bills him at the end of the month. The store is providing a(n) Copyright Cengage Learning. Powered by Cognero.

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a. installment account. b. open charge account. c. revolving account. d. selective account. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 75. Credit cards are usually based on a(n) _____ account system. a. installment b. open charge c. revolving charge d. selective ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 76. Which of the following "C's" defines the customer's ability to conserve assets? a. Capacity b. Character c. Collateral d. Conditions ANSWER: a POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 77. Zemann's, a large firm selling custodial supplies to other businesses, has decided to begin offering trade credit. Its major objective in granting credit is a. to generate consumer goodwill. b. to make sales. c. to promote the business d. to reduce bad debt risk. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 78. Buying on credit _____ the amount of working capital needed by the business doing the buying. a. augments b. decreases c. increases d. offsets ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Understand 8/29/2018 11:25 AM 12/26/2018 6:41 PM

79. Stone Creek Farm sells a special type of hay to horse owners. If the farm allows its customers to have hay delivered and then be billed at a later date, it would be using which of the following types of account? a. An open charge account b. An installment account c. A revolving charge account d. A selective account ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 80. Hillary wants to purchase a refrigerator on credit. If she uses an installment plan, which of the following is most likely to occur? a. A down payment will be required. b. A discounted price on her purchase will not be offered. c. By law, finance charges on her account cannot exceed 20 percent of the purchase price. d. Taxes will not be charged. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 81. Which of the following options is designed for long-term consumer credit? a. Credit cards Copyright Cengage Learning. Powered by Cognero.

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b. Installment accounts c. Open charge accounts d. Revolving charge accounts ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 82. Quality Cars, an independent used car dealership, utilizes long-term consumer credit in its business. Typically, consumers are allowed to place a 15 percent down payment on an automobile. Then, over a period of 48 months, the consumer is allowed to make payments on the balance of the account, which includes compound interest of 2 percent monthly on the unpaid portion. Quality Cars is employing _____ in its business. a. open charge accounts b. installment accounts c. revolving charge accounts d. selective accounts ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 83. Which of the following cards is an example of a retailer credit card? a. MasterCard b. Visa c. Discover d. JCPenney card ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 84. Handyman Hardware, a small community-based store, offers its consumers the option of using credit. Creditworthy individuals are able to use the "HH Credit Card" for all purchases up to a credit limit of $1,000. Consumers are required to pay at least 20 percent of their outstanding balance at the end of each month. A 2 percent finance charge is assessed on the unpaid balance at the end of each billing cycle. Handyman Hardware is employing _____ in its business. a. open charge accounts b. installment accounts c. revolving charge accounts d. selective accounts ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 85. A trade credit bill of $80,000 with terms of sale of 2/10, net 30 means the buyer saves _____ if the bill is paid within the discount period. a. $0 b. $1,600 c. $2,500 d. $4,000 ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 86. Dennis has made a purchase of $50,000 using trade credit with terms of 2/15, net 45. How many days does he have in which to pay to receive the discount? a. 15 b. 2 c. 45 d. 30 ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 87. Information Express is a privately owned and operated organization that collects credit information on business firms. After the organization analyzes and evaluates the data, it makes credit ratings available to client companies for a fee. Information Express is a a. trade-credit agency. b. financial credit agency. c. credit collection agency. d. credit bureau. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:25 AM 12/26/2018 6:41 PM

88. Which of the following types of organization is a good source of consumer credit information? a. Trade-credit agencies b. Third-party reports c. The Federal Credit Reporting Agency d. Credit bureaus ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 89. Slow-paying customers a. almost always build goodwill. b. are rarely a problem for small businesses. c. tie up the seller's working capital. d. yield advantages from carryover effects. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 90. A primary purpose of the federal Consumer Credit Protection Act is to a. require creditors to specify how finance charges are computed. b. grant certain rights to credit applicants regarding credit reports. c. inform consumers about all the forms of credit available to them. d. specify what information a customer's employer can release about him or her. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 91. Use product examples to illustrate elastic and inelastic demand. ANSWER: Elasticity of demand is the degree to which a change in price affects the quantity demanded. A product or service is said to have elastic demand if an increase in its price lowers demand for the product or service or a decrease in its price raises demand. Luxury cars, jewelry, or products with the latest technology are examples. A product or service is to have inelastic demand if demand does not change significantly when there is a change in the price of the product or service. Necessities such as toilet paper, sugar, or toothpaste typically have inelastic demand. POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-1 Setting a Price QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 92. List and briefly describe the five C's of credit. ANSWER: The ability to repay a loan is frequently evaluated in terms of the five C's of credit: •

• •

Character. Character is the fundamental integrity and honesty that should underlie all human and business relationships. For business customers, character is embodied in the business policies and ethical practices of the firm, generally measured by their credit history. Capacity. Capacity refers to the customer's ability to conserve assets, and to faithfully and efficiently follow a financial plan. A business customer should have sufficient cash flows to pay bills. Capital. Capital can be defined as net worth but really consists of the cash and other liquid assets owned by the customer. A prospective business customer should have sufficient capital to underwrite planned operations, including an appropriate amount invested by the owner.

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• •

Collateral. Collateral represents enough assets to secure the debt. It is a secondary source for loan repayment in case the borrower's cash flows are insufficient for repaying a loan. Conditions. Conditions refer to both the overall economy and the borrower. Economic factors include business cycles and changes in price levels, which may be either favorable or unfavorable to the payment of debts. Adverse factors that might limit a business customer's ability to pay include strong new competition, labor problems, and fires and other natural disasters.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 93. Explain the relationship between the break-even point and the contribution margin. How does demand affect this relationship? ANSWER: The break-even point is a function of a firm's fixed operating costs and expenses and the unit selling price less the unit variable costs and expenses. The higher the total fixed costs, the more units the firm must sell to reach the break-even point. The greater the difference between the unit selling price and the unit variable costs and expenses, the fewer units the firm must sell to break even. The difference between the unit selling price and the unit variable costs and expenses is the contribution margin; that is, for each unit sold, a contribution is made toward covering the company's fixed costs. The indirect impact of price on the quantity that can be sold complicates pricing decisions. Demand for a product typically decreases as price increases. However, in certain cases, price may influence demand in the opposite direction, resulting in an increased demand for a product when it is priced higher. Therefore, estimated demand for a product at various prices, as determined through marketing research, should be incorporated into the break-even analysis. POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

12/26/2018 6:41 PM

94. A firm sells trekking poles at a selling price of $130 per pair. Variable cost per set is $70, and fixed costs are $100,000. What would be the break-even point in units? ANSWER: Break-even point =

POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-2 Applying a Pricing System QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.02 - LO: 16-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 95. What are the benefits of credit to both buyers and sellers? ANSWER: Benefits of credit to buyers include the following: • • • • •

Access to working capital, often allowing for continuity of operations. The ability to satisfy immediate needs and pay for them later. Better records of purchases on credit billing statements. Better service and greater convenience when exchanging purchased items. The ability to establish a credit history.

Benefits of credit to sellers are as follows: • • • • • •

Facilitation of increased sales volume. The ability to earn money on unpaid balances. A closer association with customers because of implied trust. Easier selling through telephone- and mail-order systems and over the Internet. Smoother sales peaks and valleys, since purchasing power is always available. Easy access to a tool with which to stay competitive.

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POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-4 Offering Credit QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 96. Define three pricing strategies, and state when a small business would best use the strategy. ANSWER: Students may choose any three of the following pricing strategies: •

•

Penetration pricing. A firm that uses a penetration pricing strategy prices a product or service at less than its normal, long-range market price in order to gain more rapid market acceptance or to increase existing market share. This strategy can sometimes discourage new competitors from entering a market niche if they mistakenly view the penetration price as a long-term price. Obviously, a firm that uses this strategy sacrifices some profit margin to achieve market penetration. Price skimming. A price skimming strategy sets prices for products or services at high levels for a limited time period before reducing them to more competitive levels. This strategy assumes that certain customers will pay a higher price because they view a product or service as a prestige item. Use of a skimming price is most practical when there is little threat of short-term competition or when startup costs must be recovered rapidly. Another reason for using this strategy is the high cost of introducing a new product. The company may not have achieved economies of scale in production, so higher prices might be charged to customers who could be labeled early adopters. To reach a large market, however, the price usually needs to be reduced. Follow-the-leader pricing. A follow-the-leader pricing strategy uses a particular competitor as a model in setting a price for a product or service. A small business in competition with a larger firm is seldom in a position to consider itself the price leader. Different brands may have different characteristics, but customers often do not perceive sufficient differences to pay premium prices. Thus, small businesses selling commodities (products purchased primarily based on price) tend to be better off holding down costs so that they can price their merchandise in the same range as their larger competitors. Variable pricing. Some businesses use a variable pricing strategy to offer price concessions to certain customers, even though they may advertise a uniform price. Lower prices are offered for various reasons, including a customer's knowledge and bargaining strength. In some fields of business, therefore, firms make two-part pricing decisions. They set a standard list price but offer a range of price concessions to particular buyers—for example, those who purchase large quantities of their product. Price lining. A price lining strategy establishes distinct price categories at which similar items of retail merchandise are offered for sale. For example, men's suits (of differing quality) might be sold at $250, $450, and $850. The amount of inventory stocked at different quality levels would depend on the income levels and buying desires of a store's customers. A price lining strategy has the advantage of

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simplifying the selection process for the customer and reducing the necessary minimum inventory. Product line pricing. When a small business markets a line of products, some of which may compete with each other, pricing decisions must take into account the effects of a single product price on the rest of the line. This often results in product line pricing, placing different prices on a range of products or services to reflect the benefits to the customer of parts of the range.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 97. Layla is a well-known successful movie star who recently retired and just started designing handbags. She has opened a boutique business in her hometown, which has no national department stores. She hopes to attract other celebrities, tourists, and local residents to shop at her store. She is considering pricing strategies for her products. Which strategy would best fit her image and product? ANSWER: Layla should use a price skimming strategy to go along with her perceived image. This strategy will have her set prices at high levels for a limited time period, then reduce them to more competitive levels. This strategy uses the assumption that because of her social status, customers will pay a higher price because they will view her handbags as prestigious. She has little competition, which will help to recover startup costs more quickly if enough customers like her handbags. POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-3 Selecting a Pricing Strategy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 98. List and briefly describe the types of credit. ANSWER: There are two broad classes of credit: consumer credit and trade credit. Consumer credit is granted by retailers to final consumers who purchase for personal or family use. Trade credit is extended by nonfinancial firms, such as manufacturers and wholesalers, to business firms that are customers. Copyright Cengage Learning. Powered by Cognero.

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The three major kinds of consumer credit are: •

•

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE:

Open charge accounts. When using an open charge account, a customer takes possession of products (or services) at the time of purchase, with payment due when billed. Customers typically have a month to pay their bills from the time their statements are sent. There is no finance charge for this kind of credit if the balance on the account is paid in full at the end of the billing period. Consumers are not generally required to make a down payment or to pledge collateral. Small accounts at department stores are good examples of open charge accounts Installment accounts. An installment account is a vehicle for long-term consumer credit, useful for large purchases, such as a car, home appliance, or home renovation. A down payment is normally required, and annual finance charges can be a significant percentage of the purchase price. Payment periods are commonly from 12 to 36 months, although automobile dealers often offer an extended payment period of 60 months or even longer. Revolving charge accounts. A revolving charge account is a variation of the installment account. A seller grants a customer a line of credit, and charged purchases may not exceed the credit limit. A specified percentage of the outstanding balance must be paid monthly, forcing the customer to budget and limiting the amount of debt that can be carried. Finance charges are computed on the unpaid balance at the end of the month. A credit card is a type of revolving charge account. A credit card provides assurance to a seller that a buyer has a satisfactory credit rating and that the seller will receive payment from the financial institution that issued the card. Depending on the issuer, we can distinguish two basic types of credit cards: Bank credit cards. The best-known credit cards issued by banks or other financial institutions are MasterCard and Visa. Bank credit cards are widely accepted by retailers that want to offer credit but don't provide their own credit cards. Most small business retailers fit into this category. In return for a set fee (typically from 2 to 2.5 percent of the purchase price) paid by the retailer, the bank takes the responsibility for making collections. Some banks charge annual membership fees to their cardholders. Also, cardholders are frequently able to obtain cash up to the credit limit of their card. Retailer credit cards. Many companies—for example, department stores and oil companies—issue their own credit cards specifically for use in their outlets or for purchasing their products or services from other outlets. Customers are usually not charged annual fees or finance charges if the balance is paid each month.

With trade credit, firms selling to other businesses may specify terms of sale, such as 2/10, net 30. This means that the seller is offering a 2 percent discount if the buyer pays within 20 days of the invoice date. Failure to take this discount makes the full amount of the invoice due in 30 days. Sales terms for trade credit depend on the product sold, as well as the buyer's and the seller's circumstances. The credit period often varies directly with the length of the buyer's inventory turnover period, which depends on the type of product sold. The larger the order and the higher the credit rating of the buyer, the better the sales terms will be, assuming that individual terms are fixed for each buyer. The greater the financial strength and the more adequate and liquid the working capital of the seller, the more generous the seller's sales terms can be. 1 Hard 16-4 Offering Credit Essay

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HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/29/2018 8:02 PM 99. List the five factors that entrepreneurs need to consider with deciding to extend credit. ANSWER: The type of business, credit policies of competitors, ages and income levels of customers, the availability of adequate working capital, and economic conditions affect the decision to extend credit. POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-4 Offering Credit QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 100. Discuss the activities involved in managing credit in a small business. ANSWER: • Pertinent credit data can be obtained from several sources, including credit bureaus, financial statements, bankers, and formal trade-credit agencies such as Dun & Bradstreet. • An accounts receivable aging schedule, which categorizes receivables based on the length of time they have been outstanding, can be used to improve the credit collection process. • A small firm should establish a formal procedure for billing and collecting from credit customers. • It is important that a small firm follow all relevant federal and state credit regulations. POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Analyze 8/29/2018 11:25 AM 12/26/2018 6:41 PM

101. Guy owns a lumber yard, working directly with homebuilders and contractors. Margie, a contractor new to the area, wants to set up a credit account with the lumber yard. She has a good history of successful and profitable projects. What questions should Guy ask in evaluating the Margie's credit status? ANSWER: In evaluating the credit status of Margie, Guy will want to answer the following questions: • • •

Can Margie pay as promised? Since Margie is a new contractor, Guy must decide whether or not he thinks she will be able to have the funds needed to pay his business credit bill. Will Margie pay? Margie is a new customer to Guy's company. He needs to decide if he will be able to trust her to stay on track with her financial commitment. If so, when will Margie pay? Guy needs to consider how soon Margie will be able to repay the company.

If not, can Margie be forced to pay? If Margie refuses to pay her bill, Guy needs to consider what other options he has to force payment. POINTS: 1 DIFFICULTY: Hard REFERENCES: 16-5 Managing the Credit Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM Match the term with its definition. a. average pricing b. follow-the-leader pricing strategy c. freemium strategy d. markup pricing e. penetration pricing strategy f. prestige pricing g. price lining strategy h. price skimming strategy i. product line pricing j. variable pricing strategy DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price 16-2 Applying a Pricing System 16-3 Selecting a Pricing Strategy QUESTION TYPE: Matching Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 SMAL.LONG.20.16.02 - LO: 16-2 SMAL.LONG.20.16.03 - LO: 16-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 102. An approach based on applying a percentage to a product's cost to obtain its selling price ANSWER: d POINTS: 1 103. A technique that places different prices on a range of products or services to reflect the benefits to the customer of parts of the range ANSWER: a POINTS: 1 104. A technique that sets very high prices for a limited period before reducing them to more competitive levels ANSWER: h POINTS: 1 105. An approach based on setting a high price to convey an image of high quality or uniqueness ANSWER: f POINTS: 1 106. A technique that sets lower than normal prices to hasten market acceptance of a product or service or to increase market share ANSWER: e POINTS: 1 107. A technique that sets more than one price for a product or service in order to offer price concessions to certain customers ANSWER: j POINTS: 1 108. A technique that sets a range of several distinct merchandise price levels ANSWER: g POINTS: 1 109. A technique that uses a particular competitor as a model in setting prices ANSWER: b POINTS: 1 110. A strategy that offers customers basic features at no cost based on the idea that they will upgrade to advanced products or services at subscription prices ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 Match the term with its definition. a. consumer credit b. credit c. credit bureaus d. credit card e. installment account f. open charge account g. revolving charge account h. trade credit i. trade-credit agencies j. value DIFFICULTY: Easy REFERENCES: 16-4 Offering Credit 16-5 Managing the Credit Process QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.04 - LO: 16-4 SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 111. Financing granted by retailers to individuals who purchase for personal or family use ANSWER: a POINTS: 1 112. A line of credit that allows the customer to obtain a product or service at the time of purchase, with payment due when billed ANSWER: f POINTS: 1 113. An agreement between a buyer and a seller that allows for delayed payment for a product or service ANSWER: b POINTS: 1 114. Privately owned organizations that collect credit information on businesses ANSWER: i POINTS: 1 115. A line of credit on which the customer may charge purchases at any time, up to a pre-established limit, and must pay a percentage of the balance monthly ANSWER: g POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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116. Privately owned organizations that summarize different firms' credit experiences with individual consumers ANSWER: c POINTS: 1 117. A line of credit that requires a down payment, with the balance paid over a specified period of time ANSWER: e POINTS: 1 118. Financing provided by suppliers to client companies ANSWER: h POINTS: 1 119. The extent to which a good or service is perceived by a customer as meeting his or her needs or wants, measured by the customer's willingness to pay for it ANSWER: j POINTS: 1 Match the term with its definition. a. aging schedule b. bad-debt ratio c. break-even analysis d. break-even point e. contribution margin f. elastic demand g. elasticity of demand h. inelastic demand i. price DIFFICULTY: Easy REFERENCES: 16-1 Setting a Price 16-2 Applying a Pricing System 16-5 Managing the Credit Process QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.16.01 - LO: 16-1 SMAL.LONG.20.16.02 - LO: 16-2 SMAL.LONG.20.16.05 - LO: 16-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 12/26/2018 6:41 PM 120. The difference between the unit selling price and the unit variable costs and expenses ANSWER: e POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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121. Bad debts divided by credit sales ANSWER: b POINTS: 1 122. Demand that changes significantly when there is a change in the price of a product or service ANSWER: f POINTS: 1 123. Sales volume at which total sales revenue equals total costs and expenses ANSWER: d POINTS: 1 124. The degree to which a change in price affects the quantity demanded ANSWER: g POINTS: 1 125. A categorization of accounts receivable based on the length of time they have been outstanding ANSWER: a POINTS: 1 126. Demand that does not change significantly where there is a change in the price of a product or service ANSWER: h POINTS: 1 127. Analysis that requires the examination of cost-revenue relationships and the incorporation of sales forecasts ANSWER: c POINTS: 1

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Chapter 17 - Promotional Planning 1. Promotion consists of marketing communications that inform potential consumers about a firm or its product or service and try to persuade them to buy it. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-0 Promotional Planning QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.00 - LO: 17-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 2. A key decision in developing a promotional strategy is to decide how much you want to spend on it. a. True b. False ANSWER: False RATIONALE: A key decision in developimg a promotional strategy is determining what you want to get out of it. POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-0 Promotional Planning QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.00 - LO: 17-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 3. In practice, communication is simple: You send a message and someone else receives it and understands it. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-1 Promotion Is Communication Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 4. Successful communication includes feedback. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 5. The promotional mix includes advertising, social media, and sales promotion, but not personal selling. a. True b. False ANSWER: False RATIONALE: The combination of promotional methods is a promotional mix. POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 6. The particular mix of the various promotional tools used by a business is determined by many factors, one of which is Copyright Cengage Learning. Powered by Cognero.

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geography. a. True b. False ANSWER: RATIONALE:

True The promotional mix is influenced by three major factors: the geographical nature of the market to be reached, the size of the promotional budget, and a product's characteristics. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 7. Personal selling is an effective method for promoting toothpaste. a. True b. False ANSWER: False RATIONALE: A widely dispersed market such as toothpaste generally requires mass coverage through advertising. More individualized, local or small markets would best be served by personal selling. Nonpersonal advertising is more effective for a relatively inexpensive item. POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 8. The simplest method of determining how much to budget for promotion is to earmark a percentage of sales. a. True b. False ANSWER: True RATIONALE: Estimating expenditures would be best by costing out what the promotional efforts will need. POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 9. The percentage of sales method for estimating promotional expenditures does not make sense for new businesses with no historical sales figures on which to base their promotional budgets. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 10. Using whatever is left over to support promotional efforts after all other activities have been funded is sometimes described as the "spend the last dollar" method. a. True b. False ANSWER: False RATIONALE: Such an approach to promotional spending should be avoided because it ignores promotional goals. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:25 AM 1/3/2019 9:20 PM

11. Spending as much as the competition does for promotional efforts can lead the firm to copy competitors' mistakes as well as their successes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 12. The preferred approach to determining promotional expenditures is to decide what it will take to do the job through a comprehensive analysis of the market. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 13. Domain names cannot begin or end with a number. a. True b. False ANSWER: False RATIONALE: The Internet Corporation for Assigned Names and Numbers (ICANN), a nonprofit corporation currently overseeing the global Internet, does not register names. This step should be done through a domain registration firm. POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 14. The lower a small business ranks in search engine results, the more visitors it will attract. a. True b. False ANSWER: False RATIONALE: The sooner a small business is represented in search engine results (i.e., the higher it ranks), the more visitors it will attract. POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 15. Deciding which social networks to use, learning how to use them, and staying active and involved by sharing information and monitoring what others are doing require resources that very few small businesses have. a. True b. False ANSWER: True RATIONALE: While social networking is a way to communicate informally with other users, social networking cannot be controlled through social media such as websites and apps. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Operations Management Information Technologies KEYWORDS: Bloom’s: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:25 AM 1/3/2019 9:20 PM

16. While e-mail promotion provides a low-cost way to pinpoint customers and achieve high response rates, the issue of churning is a concern. a. True b. False ANSWER: False RATIONALE: The concerns are cluttered consumer inboxes, fear of computer viruses and spam. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 17. A blog is an application for business or entertainment loaded onto any mobile device. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 18. A quick response (QR) code allows a person to access a website without having to type in the URL. a. True b. False ANSWER: True RATIONALE: A QR code is a square barcode that connects to a website, a video, or some other web content. Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 19. For a small business, personal selling is the preferred method of promotion, due to it not being as labor intensive as other methods. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 20. A follow-up step after a sales presentation is prospecting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM Copyright Cengage Learning. Powered by Cognero.

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21. Social websites have an increasing number of subscribers providing reviews of the establishments they patronize, providing the astute entrepreneur with impersonal referrals. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 22. Inquiries by a potential customer that do not lead to a sale can still create what is known as a "promising prospect." a. True b. False ANSWER: False RATIONALE: These inquiries can create what is called a "hot prospect." POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 23. The most cost-efficient mode of personal selling may be the use of a self-employed sales or marketing representative. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 24. Salespeople will not be motivated for the same reasons that an owner is. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 25. The straight salary form of compensation is best for motivating salespeople because of the financial security that salaries provide. a. True b. False ANSWER: False RATIONALE: Straight salaries may actually reduce the motivation of salespeople precisely because of the financial security salaries provide. POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Motivation Concepts KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 26. A generous salary with a commission cap is typically the best form of compensation for salespeople in a small business. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: False RATIONALE: Putting a cap will limit top producers causing them to possibly leave the company. POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy Motivation Concepts KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 27. Advertising seeks to sell by informing, persuading, and reminding customers of the availability or superiority of a firm's products or services. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:13 AM 28. Advertising is inexpensive and adds direct value to a product or service. a. True b. False ANSWER: False RATIONALE: If the product is second-rate, the success will be temporary. Advertising should complement a good product and never be a replacement for a bad product. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 29. Product advertising is designed to make potential customers aware of a particular product or service and create a desire for it. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 30. Product advertising is intended to make the public aware of the company and enhance its image. a. True b. False ANSWER: False RATIONALE: It is institutional advertising that is intended to keep the public conscious of the company and its good reputation. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM Copyright Cengage Learning. Powered by Cognero.

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31. Creating print advertising in-house is becoming increasingly common among small firms. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 32. Most small business advertising is institutional advertising. a. True b. False ANSWER: False RATIONALE: The majority of small business advertising is product advertising. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 33. Research has found that one-shot advertisements that are not part of a well-planned promotional effort often retain their effectiveness over a long period of time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 34. The most appropriate combination of advertising media is newspaper ads and social media. a. True b. False ANSWER: False RATIONALE: Most small businesses rely on others (e.g., advertising agencies, suppliers, trade associations, advertising media) to create their promotional messages. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 35. Sales promotion refers to promotional techniques, other than personal selling or advertising, that stimulates the purchase of a particular product or service. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 36. Advertising is considered to be part of sales promotion. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False RATIONALE: Advertising is separate from a sales promotion. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 37. The distinguishing characteristics of specialties are their enduring nature and tangible value. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 38. Trade show groups claim that the cost of an exhibit is less than one-fourth the cost of sales calls. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Copyright Cengage Learning. Powered by Cognero.

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39. Many small manufacturers, while agreeing that trade show exhibits can be helpful in promotion, rightly believe that they are not as cost-effective as advertising. a. True b. False ANSWER: False RATIONALE: Trade show exhibits are more cost-effective than advertising, but they are not free. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 40. A good publicity program requires regular contacts with the news media. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 41. Coupons not only attract customers to purchase products, but they also have value even if they are not used. a. True b. False ANSWER: True RATIONALE: Although publicity is often considered to be free advertising, this type of promotion is not always free (e.g., consider charges for representation in school yearbooks and with Copyright Cengage Learning. Powered by Cognero.

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community athletic programs.) POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 42. Both wholesalers and retailers can utilize sales promotion tools to increase sales. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-6 Sales Promotion QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 43. A widely dispersed market generally requires which of the following promotional methods? a. Personal selling b. Sales promotion c. Personal promotion d. Advertising ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Copyright Cengage Learning. Powered by Cognero.

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44. An effective promotional strategy takes into account all of the following EXCEPT a. the investments of the company. b. the characteristics of the product. c. learning from the competitors. d. the costs of promotion. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:14 AM 45. Which of the following forms of promotion would be the most effective for ink pens? a. Advertising b. Personal selling c. Sales promotions d. Social media ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 46. Which of the following forms of promotion would be the most effective for industrial insulation products? a. Advertising b. Personal selling c. Sales promotions Copyright Cengage Learning. Powered by Cognero.

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d. Social media ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:15 AM 47. Which of the following should be evaluated to establish a promotion-to-sales ratio? a. The level of spending by competitors b. The firm's objectives c. The firm's own past experiences d. The strengths and weaknesses of the company ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 48. Get Moving, a fitness equipment retailer, has been successful in a strong economy by spending 4% of its sales revenues on promotions. What adjustments, if any, should Get Moving make now that the economy has gone into recession? a. Continue to spend 4% of sales on promotions, even though this results in a lower promotional budget. b. Increase the promotional budget to attract new customers. c. Decrease the promotional budget, since no one has any money to spend anyway. d. Spend 4% of profits on promotions rather than 4% of sales. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply | Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 49. A major shortcoming with the _____ method of determining promotional expenditures is a tendency to spend more on promotion when sales are increasing and less when they are declining. a. percentage of sales b. "what it will take to do the job" c. sales plus d. "all you can afford" ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 50. Using whatever is left over to support promotional efforts after all other activities have been funded is sometimes described as the _____ method. a. percentage of profits b. "all you can afford" c. "what the market will bear" d. cost plus ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember Copyright Cengage Learning. Powered by Cognero.

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51. The "spending as much as the competition" method a. can be used to duplicate the promotional efforts of close competitors. b. depends on the firm's past experiences. c. should be used to introduce a unique, new product. d. should never be used. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 52. Inspiring Toys, a small manufacturer of educational toys, is formulating a budget for next year's promotional activities. Which of the following methods should be considered to react to a short-run promotional tactic done by Mattel? a. Spending at the same level as competitors b. Budgeting a percentage of sales c. Determining how much is needed to achieve objectives d. Spending whatever is left over after other expenses are covered ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply | Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 53. The biggest pitfall of spending at the same level as competitors for promotion is that it a. tends to not pay off in the long run. b. can make the firm lazy. c. not feasible for reacting to short-run promotional tactics. Copyright Cengage Learning. Powered by Cognero.

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d. can drain the company's budget more quickly than other methods. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:16 AM 54. According to the Pew Research Center, approximately _____ out of every ten Americans are connecting with one another via social media sites. a. three b. five c. seven d. nine ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 55. The _____ allows users to find their way around the Internet. a. Domain Name System (DNS) b. Internet Corporation for Assigned Names and Numbers (ICANN) c. Small Business Administration (SBA) d. World Wide Web Consortium (W3C) ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 56. Ricky created an attractive website but is disappointed that he hasn't received many hits. You suggest that he a. place a banner ad on other websites. b. purchase a billboard ad to advertise his website. c. buy a newspaper ad to promote his website. d. hire a different website creator. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 57. Stacy was pleased when positive comments about her products appeared on a blog but became discouraged when other reviewers panned the same products. Stacy must remember that a. business owners cannot absolutely control how their businesses are viewed by consumers. b. customers will misuse the products, resulting in negative comments. c. people are more likely to share complaints than compliments. d. if she wants more positive comments, she will have to write them herself. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM Copyright Cengage Learning. Powered by Cognero.

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58. Which of the following is a good way to increase the volume and quality of traffic to a particular website? a. Place banner ads on other websites. b. Include the URL on print promotions and business cards. c. Make sure that the site is as search-engine friendly as possible. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 9:29 AM 59. A small, specialized software program is called a. e-mail. b. spam. c. a blog. d. an app. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 60. _____ is the process of increasing the volume and quality of traffic to a particular website. a. Blogging b. Search engine optimization (SEO) c. Prospecting d. Social networking ANSWER: b POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 61. Before social networking sites became dominant, _____ provided a low-cost way to pinpoint customers and achieve high response rates. a. e-mail promotion b. search engine optimization (SEO) c. reciprocal advertising d. quick response (QR) codes ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 62. According to the Pew Research Center, in 2018, _____% of adults in the United States owned a smartphone. a. 95 b. 77 c. 52 d. 63 ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:25 AM 1/3/2019 9:20 PM

63. Personal selling degenerates into mere order-taking when a salesperson a. lacks product knowledge. b. is persistent about selling the product. c. is not friendly and enthusiastic when a customer enters the store. d. cannot handle objections. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 64. Media publications, public records, and directories are sources of a. impersonal referrals. b. marketer-initiated contacts. c. personal referrals. d. customer-initiated contacts. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 65. A salesperson at Plumbers Warehouse searches public records of new building permits to identify potential customers for new bathrooms. This salesperson is relying on _____ to identify sales prospects. a. personal referrals b. marketer-initiated contacts c. impersonal referrals Copyright Cengage Learning. Powered by Cognero.

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d. customer-initiated contacts ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 66. Mary, a sales representative for a small cleaning business, asks current customers for names of friends, customers, and other businesses that might be interested in the company's cleaning services. Mary is relying on _____ to identify potential customers. a. customer-initiated contacts b. impersonal referrals c. marketer-initiated contacts d. personal referrals ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 67. Will is a salesperson for a small appliance store. In an attempt to locate potential new customers, he decides to poll Facebook visitors; they are entered into a drawing for a gift certificate at the store. Individuals who complete the poll will receive a phone call from Will about the store's products and current promotions. Will is gaining knowledge of potential customers through a. personal referrals. b. marketer-initiated contacts. c. impersonal referrals. d. customer-initiated contacts. ANSWER: b POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Creation of Value Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 68. Telephone calls and mail surveys are examples of a. impersonal referrals. b. marketer-initiated contacts. c. personal referrals. d. customer-initiated contacts. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 69. The two major steps in preparing for a sales presentation are _____ and _____. a. advertising; practicing b. prospecting; practicing c. publicity; prospecting d. creating; practicing ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-4 Personal Selling in the Small Firm-459 QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Creation of Value Bloom’s: Understand 8/29/2018 11:25 AM 1/3/2019 9:20 PM

70. Most customer objections can be categorized as relating to all of the following EXCEPT a. product. b. need. c. pitch. d. timing. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 71. Tyler cannot afford to hire a salesperson for his small business but feels personal selling is the best way to encourage prospects to become customers. You remind him that a. he may have to be his own salesperson for a while. b. good salespeople are expensive. c. the most cost-efficient mode of selling may be to use sales or marketing representatives. d. he can always send his production people out to make sales calls. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - Communication TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM Copyright Cengage Learning. Powered by Cognero.

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72. Which of the following compensation plans is best suited for new salespersons in a small business? a. Straight salary plan b. Strictly commissions-on-sales plan c. Combination of salary and commissions, with salary representing the larger portion d. Combination of salary and commissions, with commissions representing the larger portion ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 73. Media Corporation posts a photo of the week's top salesman on the company website. Every month, it includes an article about its top salesperson in its internal newsletter. This is an example of a. personal recognition. b. compensation. c. a stock plan. d. a bonus plan. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom's: Apply | Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 74. The two basic types of advertising are _____ advertising and _____ advertising. a. institutional; product b. product; institutional c. product; publicity d. specialty; publicity ANSWER: b POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:18 AM 75. Stephen is a new entrepreneur who would like to advertise his business but feels his creativity is insufficient to the task. Where can he find help? a. Competing businesses b. Neighboring businesses c. Computer sales firms d. Advertising specialists ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 76. The most appropriate combination of advertising media depends on _____ and _____. a. the type of business; its current circumstances b. customer income; the class of the customer c. the ad agency; the business's current circumstances d. the type of business; the class of the customer ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Creation of Value Bloom’s: Understand 8/29/2018 11:25 AM 1/3/2019 9:20 PM

77. To make an informed selection about where to advertise, a small business manager should a. consult different banks for loans to pay for the process. b. create the message in conjunction with past campaigns. c. learn about the strengths and weaknesses of each advertising medium. d. perform a statistical analysis of the target market(s). ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Strategy KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 78. Which of the following advertising media is considered to have a low pass-along rate? a. Newspapers b. Outdoor media c. Radio d. Television ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 79. Which of the following advertising media is considered to have a no visual treatment? Copyright Cengage Learning. Powered by Cognero.

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a. Magazines b. Outdoor media c. Radio d. Television ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 80. For best results, sales promotion typically is used a. in combination with personal selling and advertising. b. as a standalone promotional technique. c. periodically rather than regularly. d. None of these are correct. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 9:30 AM 81. All of the following are widely used sales promotional tools EXCEPT a. publicity. b. phone calls. c. specialties. d. trade show exhibits. ANSWER: b POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:20 AM 82. Marcia is considering offering a promotional item for her salespeople to give to prospects at their first appointment. Which of the following would be the best choice? a. A coffee mug b. A coupon for a discount on the first purchase c. Tickets to a professional sports event d. A bottle of fine wine ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom's: Apply | Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 83. The greatest benefit of trade show exhibits is the a. creation of goodwill for a firm. b. tangible value they provide to customers. c. potential cost savings over personal selling. d. individualized attention they give to prospects. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:25 AM 1/4/2019 11:21 AM

84. Hands-on experience with a product is possible with a. coupons. b. personal selling. c. specialty promotions. d. trade show exhibits. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 85. Anne owns a small business dealing with industrial products. She currently uses personal selling extensively, but she wants to reduce her cost without losing exposure. Which of the following promotional tools should she use? a. Contests b. Coupons c. Specialties d. Trade show exhibits ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply | Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 86. Terrance is concerned that printing and distributing coupons will be a waste of time and money because the coupons may not be redeemed. You remind him that a. the printing expenses are sunk costs and have no impact on the decision. Copyright Cengage Learning. Powered by Cognero.

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b. a study found that customers who received but did not redeem coupons actually increased their purchasing from the stores associated with the coupons. c. he can still make a profit by issuing coupons. d. coupons will attract only browsers but not shoppers. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:21 AM 87. Raymond is considering whether to advertise on the placemats used in many local restaurants. One of the arguments in favor of this action is a. publicity is important to a small business and should be used at every opportunity. b. you never know who might see the ad on the placemat. c. the cost of printing is shared with many other local businesses. d. every ad will generate approximately 1,000% of its cost in revenues. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Analyze | Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:22 AM 88. Which of the following provides visibility for a business at little or no cost? a. Salesmanship b. Communication c. Publicity d. Advertising ANSWER: c POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 89. Which of the following statements about publicity is NOT true? a. Publicity provides visibility at little or no cost. b. A good publicity program requires regular contacts with the news media. c. The benefits of publicity are hard to measure. d. Although publicity can be an effective promotional tool, it is not a vital part of public relations for a small business. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom's: Apply | Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 90. List the factors that determine an effective promotional strategy. ANSWER: An effective promotional strategy is influenced by the geographical nature of the market and includes the promotional mix, the promotional budget, the characteristics of the product, learning from competitors, and listening to customers. POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-1 Promotion Is Communication QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/4/2019 11:23 AM

91. List the four common methods of determining the appropriate level of promotional expenditures. ANSWER: Four approaches that small business owners often use include the following: 1. Budgeting as a percentage of sales. 2. Spending whatever is left over after other expenses are covered. 3. Spending at the same level as competitors. 4. Determining how much is needed to achieve objectives. POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-2 Determining the Promotional Budget QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.02 - LO: 17-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:25 AM 92. What are some do's and don'ts for using social media marketing? ANSWER: Do's • • • • •

Do tell stories personalizing your brand and company. Do build relationships with opinion leaders, including journalists. Show an interest in what others are writing about. Do ask your customers to review the products they buy from you. People trust the endorsements and recommendations of other customers more than those of someone who works for you. Do keep it quick and short. Do take keywords seriously. Keywords bring people to your site. Emphasize the keywords that your customers search for in your URL, in title tags, and in headings.

Don'ts • • • • •

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE:

Don't overpromote. Provide more useful information than promotional information. Don't waste your time on the wrong network. Make sure you know your target customers and where they get their information. Don't expect your customers to be perfect. Keep common misspellings with your product and business in your search engine list to help people find you. Don't use hype, slang, or abbreviations. Don't overinvest in social media at the expense of building content on your own website.

1 Hard 17-3 Promotion Using the Internet and Social Media Essay

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HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 93. What are five website design guidelines? ANSWER: Students may choose any five of the following guidelines: 1. Select and register your domain name. Comply with registration rules, and choose a descriptive and user-friendly name. 2. Choose a Web host. Determine the primary purpose of your website, and then locate a host that best fits that purpose (types of hosts include e-commerce, blogging, business, and similar options). 3. Decide on the layout. Design a site that balances attractiveness with the ability to interact. 4. Provide easy navigation. Do not overload a page. Enable users to access any content with as few clicks as possible. 5. Stay consistent in style. Inconsistency in headings, fonts, page layouts, color schemes, and terms only confuses visitors and appears amateurish. 6. Make sure the website can be accessed by multiple devices. Users may search for your company from smartphones and tablets, as well as desktops and laptops. 7. Engage in search engine optimization (SEO). Serious competitors are applying SEO strategies to improve their websites visibility. 8. Keep the website fresh. Review your site frequently to remove outdated material, introduce new links, experiment with new formats, and make other changes. 9. Include a call to action. Think again about your purpose, and invite users to take the action you are seeking. 10. Supply contact information. Be sure that visitors know who you are and how to get in touch with you. POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-3 Promotion Using the Internet and Social Media QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.03 - LO: 17-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Creation of Value Information Technologies KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM Copyright Cengage Learning. Powered by Cognero.

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94. What are the advantages and disadvantages of using salary and commission as methods of compensating salespeople? ANSWER: Using commissions as compensation is simple and directly related to productivity. A certain percentage of the sales generated by a salesperson represents his or her commission. Revenue is generated for the firm, so the money is readily available to pay the salesperson. Such a plan incorporates a strong incentive for sales effort—no sale, no commission! On the negative side, a salesperson's job is always about more than just making the sale. Personnel commissions might be less likely to provide follow-up service or complete after-sale paperwork or other tasks that the business needs to have done. The straight salary form of compensation provides salespeople with income security, regardless of sales made. However, working for a straight salary can potentially reduce a salesperson's motivation by providing income despite low performance or no sales at all. POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-4 Personal Selling in the Small Firm QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.04 - LO: 17-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:26 AM 95. What are the specific services that an advertising agency can provide? ANSWER: Advertising agencies provide many services, including the following: • Graphic design, artwork, and even printing for specific advertisements and/or commercials. • Recommendations for media with the greatest "pulling power" for the product or service. • Copywriting for traditional ads, as well as for blogs, press releases, and other promotional materials. • Assistance with trade shows and merchandise displays. • Website design and social media management. • Mailing and e-mail list management. POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM Copyright Cengage Learning. Powered by Cognero.

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96. Choose three of the major advertising media and list the advantages and disadvantages of each medium, using the table below. Medium Advantages Disadvantages

ANSWER:

Students may choose any three of the following media: Medium Internet

Newspapers

Advantages Disadvantages • Ability to target • Possible difficulty in demographics measuring ad effectiveness and return on investment • Easy to update • Not all customers have access • Relatively short lead time required for creating Web• Firms in industries where based advertising technology changes rapidly must be careful not to leave • Natural fit with social obsolete products on display networking • Service issues • • • • • • •

Magazines

• • • • • •

Radio

• • • • • •

Geographic selectivity and flexibility Short-term advertiser commitments News value and immediacy Year-round readership High individual market coverage Co-op and local tie-in availability Short lead time

• • • •

Little demographic selectivity Limited color capabilities Low pass-along rate May be expensive

Good reproduction capabilities, especially for color Demographic selectivity Regional selectivity Local market selectivity Relatively long advertising life High pass-along rate

•

Long-term advertiser commitments Slow audience buildup Limited demonstration capabilities Lack of urgency Long lead time

Low cost Immediacy of message Can be scheduled on short notice Relatively no seasonal change in audience Highly portable Short-term advertiser commitments

• •

• • • •

• •

No visual treatment Short advertising life of message High frequency required to generate comprehension and retention Distractions from background sound Page 41

Television

•

Entertainment carryover

•

Commercial clutter

•

Ability to reach a wide, diverse audience Low cost per thousand viewers Creative opportunities for demonstration Immediacy of messages Entertainment carryover Demographic selectivity with cable stations

• •

Short life of message Some consumer skepticism about claims High campaign cost Little demographic selectivity with network stations Long-term advertiser commitments Long lead times required for production Commercial clutter

•

Ability to target respondents Provides a detailed and personalized message

• • •

Repetition Moderate cost Flexibility

• •

•

Geographic selectivity

• • • • •

Direct Mail

Outdoor Media

•

• • • • •

•

May be tossed out as "junk" mail Rising costs per qualified prospect Short message Lack of demographic selectivity High "noise" levels may distract audiences

POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Information Technologies KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 97. Patty has been in operation for five years with a seasonal business, Patty's Pickin' Patch, offering U-Pick organic vegetables in season. Other services include hay rides around the farm and a corn maze. For each basic type of advertising, discuss what advertising media Patty would use and how these types would benefit the company. ANSWER: For product advertising, Patty could make customers aware of the products and services such as the organic vegetables, hay rides, and corn maze. A newspaper, radio, or television advertisement could stress these products and drive potential customers to the website. Institutional advertising would focus on the business (especially its five-year history) and should add to the credibility and the image of the business. This advertising would be best for the website. Copyright Cengage Learning. Powered by Cognero.

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The same advertisement could be used to promote both the product and the institutional themes. Both should be consistent in either informing, persuading, or reminding customers of what Patty's Pickin' Patch can offer. POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-5 Advertising Practices QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.05 - LO: 17-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 98. Rockin' Rebels, a rock band, would like to have items at their live shows to gain exposure and attract fans to their merchandise table. What promotion items should Rockin' Rebels use, and what advantages will this provide? ANSWER: Rockin' Rebels should use specialty items at their live shows to attract fans to their merchandise table. The items should be imprinted with the Rockin' Rebels name and/or identifying slogan. The items should be enduring in nature and tangible because many fans may want to have the band autograph the item. The result is an item that will be worth something to the fan and will have value. Most bands would have CDs for sale but could also offer pictures, calendars, key chains, shirts, or anything unique for the fans. Offering these items will allow the band to develop a one-on-one relationship with their fans, develop goodwill for their business, and help develop their band image. POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Creation of Value KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/3/2019 9:20 PM 99. List and briefly describe four widely used sales promotional tools. ANSWER: 1. Specialties. There are countless specialty items: calendars, pens, key chains, coffee mugs, and shirts. Almost anything can be used as a specialty promotion, as long as each item is imprinted with the firm's name or other identifying slogan. The distinguishing characteristics of specialties are their enduring nature and tangible value. The key to an effective specialty item is that it lasts—the customer or client has the tangible, visible item for months or years, keeping the name of the company or product in front of them. As functional products, they are worth something to recipients. Specialties can be used to promote a product directly or to create goodwill for a firm. They are excellent reminders of a firm's existence. Finally, specialties are personal. They are distributed directly to the Copyright Cengage Learning. Powered by Cognero.

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customer in a personal way, they can be used personally, and they have a personal message. A small business needs to retain its unique image, and owners often use specialties to achieve this objective. 2. Trade show exhibits. Trade show exhibits allow potential customers to get hands-on experience with a product. Trade show exhibits are of particular value to manufacturers. The greatest benefit of these exhibits is the potential cost savings over personal selling. Trade show groups claim that the cost of an exhibit is less than one-fourth the cost of sales calls, and many small manufacturers agree that exhibits are more cost-effective than advertising. 3. Coupons. Coupons offer the user a discount off the regular price of an item. Their purpose is to attract new customers and reward continuing users of the product or service. Coupons have value if when they are not used. A study found that consumers who received but did not redeem coupons actually increased their purchasing from the stores associated with the coupons. 4. Publicity. Publicity provides visibility for a business at little or no cost. Publicity can be used to promote both a product and a firm's image. It is a vital part of public relations for the small business. A good publicity program requires regular contacts with the news media. While the benefits can be difficult to measure, publicity is nevertheless important to a small business and should be used at every opportunity.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 17-6 Sales Promotion QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Creation of Value KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:27 AM Match the term with its definition. a. advertising b. app c. blog d. e-mail promotion e. hyperlink f. institutional advertising g. personal selling h. product advertising i. promotion j. promotional mix k. prospecting l. publicity m. quick response (QR) code Copyright Cengage Learning. Powered by Cognero.

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n. sales promotion o. social media DIFFICULTY: REFERENCES:

Easy 17-1 Promotion Is Communication 17-3 Promotion Using the Internet and Social Media 17-4 Personal Selling in the Small Firm 17-5 Advertising Practices 17-6 Sales Promotion QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.17.01 - LO: 17-1 SMAL.LONG.20.17.03 - LO: 17-3 SMAL.LONG.20.17.04 - LO: 17-4 SMAL.LONG.20.17.05 - LO: 17-5 SMAL.LONG.20.17.06 - LO: 17-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic United States - BUSPROG: Technology TOPICS: Creation of Value Strategy Information Technologies KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:25 AM DATE MODIFIED: 1/4/2019 11:29 AM 100. A face-to-face meeting with a customer ANSWER: g POINTS: 1 101. A blend of nonpersonal, personal, combined, and special forms of communication aimed at a target market ANSWER: j POINTS: 1 102. An online journal that offers a writer’s experiences, opinions, and more ANSWER: c POINTS: 1 103. A promotional strategy that provides visibility for a business at little or no cost ANSWER: l POINTS: 1 104. A strategy to sell by informing, persuading, and reminding customers of the availability or superiority of a firm's products or services ANSWER: a POINTS: 1 105. A systematic process of continually looking for new customers ANSWER: k POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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106. A presentation designed to make potential customers aware of a specific product or service and create a desire for it ANSWER: h POINTS: 1 107. A presentation of information about a particular firm, designed to enhance the firm's image in order to make its product advertising more credible and effective ANSWER: f POINTS: 1 108. Abbreviation for a small, specialized software program ANSWER: b POINTS: 1 109. A square bar code that connects to a website, a video, or some other Web content ANSWER: m POINTS: 1 110. Social networking and microblogging websites, as well as other means of online communication, where users share personal messages, information, videos, and other content ANSWER: o POINTS: 1 111. A word, phrase, or image that a user may click on to go to another part of a document or website or to a new document or website ANSWER: e POINTS: 1 112. An inclusive term for any promotional technique other than personal selling and advertising that stimulates the purchase of a particular product or service ANSWER: n POINTS: 1 113. Delivery of a firm's message by electronic mail ANSWER: d POINTS: 1

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Chapter 18 - Global Opportunities for Small Businesses 1. International dissimilarities in language and culture, business practices, and government regulations are increasing over time. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-0 Global Opportunities for Small Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.00 - LO: 18-0 NATIONAL STANDARDS: United States - BUSPROG: Diversity TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 2. Globalization explains the increasing similarity of markets around the world. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-0 Global Opportunities for Small Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.00 - LO: 18-0 NATIONAL STANDARDS: United States - BUSPROG: Diversity TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 3. Born-global firms are small companies launched with cross-border business activities in mind. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUSPROG: Diversity Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Strategy Bloom's: Remember 8/29/2018 11:26 AM 1/1/2019 10:37 PM

4. Entrepreneurs decide to go global to expand their opportunities, but sometimes they are forced to enter foreign markets to compete with firms that have already done so. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUSPROG: Diversity TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 5. While a small firm can have global operations, size will limit growth. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:37 PM 6. The U.S. Department of Commerce publishes a handbook that outlines the important steps entrepreneurs must go through to become a global business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 7. The U.S. Department of Industry provides information for entrepreneurs considering global operations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 8. A small business owner who decides to expand internationally should study the competitive forces in the foreign market. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM Copyright Cengage Learning. Powered by Cognero.

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9. A production capacity question that needs to be answered before a company goes global with operations is "How much additional production capacity will be needed at home and abroad?" a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 10. The motivation to take domestic products to foreign markets is more relevant today than in the past. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUSPROG: Diversity TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 11. Increasing sales in international markets is one of many viable ways to recoup a firm's investments in research and development. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Strategy Bloom's: Understand 8/29/2018 11:26 AM 12/31/2018 10:37 AM

12. Twenty-five percent of the world’s population lives in the United States. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 13. The primary motivation for expansion into Asian markets is to be closer to sources of raw materials. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 14. Today, companies tend to focus on developed countries as they search out international markets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUSPROG: Diversity TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 15. The term BRICs refers to Bangladesh, Romania, Ireland, Czechoslovakia, and Slovenia, all emerging markets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:39 PM 16. Together, China and India account for more than 50 percent of the world's 6 billion inhabitants. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 17. Products that sell at home usually require little or no adaptation to be well received in foreign markets. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 18. By informing consumers about the lifestyles of others, globalization is leading toward more diverse consumer preferences. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 19. Efforts to exploit the competitive advantage of specialized products across several international markets are more important to small businesses than to their large corporate competitors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Strategy Bloom's: Understand 8/29/2018 11:26 AM 12/31/2018 10:37 AM

20. Experience curve efficiencies are the per-unit savings gained from the repeated production of the same product. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 21. Learning effects occur when the insight an employee gains from experience leads to improved work performance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 22. Gains from learning effects continue to grow after startup; economies of scale efficiencies decline as the business grows. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 23. Increasingly, small firms are going global in search of raw materials. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 24. International outsourcing and offshoring are increasingly being used by companies going global to cut costs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 25. The unique features of a local environment can yield benefits to small firms locating there even when the costs are Copyright Cengage Learning. Powered by Cognero.

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greater. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 26. Increasingly, small firms find that they must locate their operations abroad if they are to keep their contracts as suppliers to large companies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 27. Exporting involves the sale of products produced in the home country to customers in another country. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Strategy Bloom's: Remember 8/29/2018 11:26 AM 12/31/2018 10:37 AM

28. A small firm can generate the greatest financial returns using international licensing strategies when these efforts involve the company's products. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 29. Foreign licensing can be used to protect against counterfeit activity. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 30. While opening an overseas sales office can be effective, small businesses should wait until sales in the local market are great enough to justify the move. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 31. A greenfield venture is where small firms purchase a foreign business from another firm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 32. An economic risk for a global company is the threat of new labeling regulations. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM Copyright Cengage Learning. Powered by Cognero.

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33. Political moves by an international country have implications on the domestic company's economic risk. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 34. Conducting business internationally will never be as easy as doing business on the domestic front. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 35. China, India, and Russia are classified as most challenging according to the World Bank's "Ease of Doing Business Index." a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 36. Moderately challenging countries according to the World Bank's "Ease of Doing Business Index" include Brazil, Mexico, and Saudi Arabia. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 37. A small business should begin its research of going global by exhausting primary sources of information. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 38. Foreign governments sometimes sponsor trade missions to promote strategic alliances in international markets. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 39. Perhaps the easiest way to break into international markets is to use a trade intermediary. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 40. Trade leads are accessed most often through contacts. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM Copyright Cengage Learning. Powered by Cognero.

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41. A revocable letter of credit is an agreement to honor a draft or other demand for payment when specified conditions are met and can only be changed by the seller. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 42. An export remarketer sells the products overseas under its own name through contacts and assumes all risks. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:40 PM 43. When Wayne opened his business many years ago, most businesses operated only within one country. Thanks to _____, businesses now increasingly take advantage of cross-border activities. a. born-global businesses b. globalization c. economic freedom d. economic liberty ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-0 Global Opportunities for Small Businesses Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.00 - LO: 18-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 44. Renee opened her business with the intention of importing goods from Brazil and selling them in the United States. We could say that this business is a. an exporter. b. born global. c. ready to launch offshoring. d. a trade mission. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 45. Allen is considering entering the global marketplace. Which of the following questions should be answered first? a. Does the company have the necessary "deep pockets" to follow through? b. Are the company’s domestic operations capable of subsidizing overseas operations? c. Is the company’s technology sufficient to enter into the international game? d. Is the company up to the task? ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:26 AM 12/31/2018 10:37 AM

46. Antonio’s small pasta firm is considering exporting. A Canadian grocery store chain with its corporate headquarters in Quebec has approached him. Which question would need to be answered in relation to the pasta company’s management experience and resource objectives? a. How are the initial expenses of expanding to Canada going to be covered? b. What international expertise does Antonio have, specifically does he speak French? c. What are Antonio's reasons for exporting to Canada? d. How much additional production capacity will be needed at home and abroad? ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 47. A Canadian grocery store chain with its corporate headquarters in Quebec has approached Antonio's small pasta firm about possible exporting. Which of the following questions would need to be answered in relation to the pasta company's management objectives? a. How are the initial expenses of expanding to Canada going to be covered? b. What international expertise does Antonio have, specifically does he speak French? c. What are Antonio's reasons for exporting to Canada? d. How much additional production capacity will be needed at home and abroad? ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 48. Antonio's small pasta firm is considering exporting its products. A Canadian grocery store chain with its corporate headquarters in Quebec has approached him. Which of the following questions would need to be answered in relation to Copyright Cengage Learning. Powered by Cognero.

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the pasta company's financial capacity objectives? a. How are the initial expenses of expanding to Canada going to be covered? b. What international expertise does Antonio have, specifically does he speak French? c. What are Antonio's reasons for exporting to Canada? d. How much additional production capacity will be needed at home and abroad? ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 49. A Canadian grocery store chain with its corporate headquarters in Quebec has approached Antonio, the owner of a company that produces pasta, about exporting its pasta into Canada. Which of the following questions would need to be answered in relation to the company's production capacity objectives? a. How are the initial expenses of expanding to Canada going to be covered? b. What international expertise does Antonio have, specifically does he speak French? c. What are Antonio's reasons for exporting to Canada? d. How much additional production capacity will be needed at home and abroad? ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 50. For most small businesses, the primary motivation for going global is to a. develop new market opportunities. b. reduce the costs of doing business. c. gain access to resources that are important to the firm's operations. d. capitalize on special features of location. ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 51. According to the 2017 BRICS Markets, which of the following countries has the greatest economic growth? a. Brazil b. China c. India d. Russia ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:41 PM 52. Seeking to extend the product life cycle by expanding into international markets has become a less effective strategy because a. customer preferences have become more similar around the world. b. income levels in many countries are insufficient to support this strategy. c. international delivery systems cannot handle the variety of company distribution systems. d. product life cycles have already been growing over the years. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Strategy Bloom's: Analyze 8/29/2018 11:26 AM 12/31/2018 10:37 AM

53. International markets are increasingly demanding a. the same products that are distributed to other national markets. b. differentiated products that satisfy their unique needs and interests. c. direct access to products sold elsewhere in the world. d. more expensive products and fewer inexpensive products. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 54. To expand a market, an emerging motivation for going global is to a. take advantage of unique features of the local market. b. find buyers for highly specialized products. c. obtain tariff reductions. d. extend the product life cycle. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 55. Experience curve efficiencies refers to a. expanding a business globally to decrease per unit costs. Copyright Cengage Learning. Powered by Cognero.

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b. having more experienced team members. c. insights gained by employees that lead to improved work performance. d. the outcomes of learning effects and economies of scale. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 56. A company with the most experienced production employees and the lowest unit costs in its industry indicates that it has benefited from a. learning effects. b. experience curve efficiencies. c. economies of scope. d. economies of scale. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 57. Learning effects occur when a. mistakes are made and then new solutions are found. b. insights gained by employees enhance their work performance. c. economies of scale are present. d. companies take advantage of experience curve efficiencies. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:42 PM 58. As Antonio's pasta company increases in size, the business is able to realize economies of scale a. through learning effects from manufacturing experience. b. through incremental drops in costs that result from the doubling of output. c. by spreading investment costs across more units of output. d. through efficiencies of operations in service operations. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:45 PM 59. In the past, companies have left the United States to a. take advantage of unique features of the local market. b. find raw materials. c. change the shape of the product life cycle. d. serve the local community through the business. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

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60. A company specializing in flavoring compounds opens a plant near the rain forest. This move enables its biologists to derive flavors without destroying the plants and supports company globalization efforts being related to a. reducing tariffs. b. cutting costs. c. expanding its market. d. gaining access to resources. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:46 PM 61. An increasing number of technology companies are relocating their operations in Russia to a. obtain raw materials. b. gain access to skilled labor. c. create job opportunities for domestic employees. d. take advantage of government incentives. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 62. Nike and many other companies engage in international outsourcing, which refers to a. sending U.S. employees to manage foreign-based operations. b. relocating stateside operations abroad. c. obtaining raw materials in foreign countries. Copyright Cengage Learning. Powered by Cognero.

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d. accessing foreign business operations through contracts with independent providers. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 63. Labor rates have risen over time to the point that Antonio's Pasta is considering _____ to reduce costs. a. learning effects b. offshoring c. exporting d. importing ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 64. A company that operates a customer service call center is likely to contract with a company in India to a. capitalize on the special features of location. b. cut costs. c. expand its market. d. gain access to resources. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management Strategy KEYWORDS: Bloom's: Analyze | Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 65. Some small firms choose to outsource internationally in order to a. avoid domestic taxes. b. avoid competition from other U.S. companies. c. cut costs and access talented foreign employees. d. take advantage of legal loop-holes in foreign countries. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 66. Regional free-trade areas have been formed in order to a. duplicate government regulatory systems. b. reduce tariffs to increase trade. c. coordinate the currencies of included countries. d. accommodate the demands of organized labor. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM Copyright Cengage Learning. Powered by Cognero.

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67. When it comes to cutting costs, many foreign companies have chosen to locate production facilities in Mexico to a. obtain tariff reductions. b. find raw materials. c. follow large client firms that locate abroad. d. find suppliers offering highly specialized products. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 68. If an olive oil importer sets up operations in Italy to be near its supplier, the company is going global by a. capitalizing on the special features of location. b. cutting costs. c. expanding its market. d. gaining access to resources. ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 69. For some small businesses, a recent trend for going global is to a. be closer to large clients. b. extend a product life. c. find raw materials. d. reduce transportation costs. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 70. Edward is a young entrepreneur with grand plans, including international expansion of his new company. Once that decision is made, Edward's next step is to a. begin to hire employees with international experience. b. join a trade mission. c. plan a strategy that increases the potential of the firm. d. spend some time estimating the market potential of various countries. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 71. A fundamental activity for global small business success is a. avoiding rigid planning that commits the firm's resources to a single plan of action. b. finding international markets that fit the company's unique potential. c. figuring out which of the firm's competitors is capable of copying its strategy. d. tapping government programs that provide incentives for international expansion. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 72. If Antonio accepts the offer of the Canadian grocery to sell his American-made pasta in Canada, he will be a. exporting. b. importing. c. offshoring. d. forming an international strategic alliance. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 73. Importing involves a. the authorized use of intellectual property. b. selling products from abroad in the firm's home market. c. purchasing the right to manufacture and sell a firm's product in overseas markets. d. the sale of products produced in the home country to customers in another country. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 74. Mattel has allowed a producer in Thailand to manufacture and sell its branded dolls in overseas markets. The company Copyright Cengage Learning. Powered by Cognero.

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in Thailand is a a. royalty receiver. b. licensor. c. licensee. d. license initiator. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Legal Responsibilities KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 75. If Finagle-A-Bagel contracts with a baker in Hong Kong to manufacture and sell a product in overseas markets, Finagle-A-Bagel would be the a. royalty receiver. b. licensor. c. licensee. d. license initiator. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy Legal Responsibilities KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:48 PM 76. For each unit produced under the licensing contract, the Hong Kong baker will pay _____ to Finagle-A-Bagel. a. trademark fees b. royalties c. general licensing fees d. copyright fees Copyright Cengage Learning. Powered by Cognero.

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ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:49 PM 77. The unauthorized use of intellectual property is called a. royalties. b. international franchising. c. foreign licensing. d. counterfeit activity. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 78. International franchising is a variation on the theme of a. exporting. b. importing. c. foreign licensing. d. international strategic alliances. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 79. John is interested in joining with a large corporation in a cooperative venture to share risks and pool resources for his small auto parts manufacturing business. The strategy option he is exploring could best be described as a. an international strategic alliance. b. exporting. c. importing. d. international cost shifting. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 80. A business that locates a production facility or sales office overseas by purchasing a foreign business from another firm is participating in a. a cross-border acquisition. b. a greenfield venture. c. offshoring. d. outsourcing. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Application | Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM Copyright Cengage Learning. Powered by Cognero.

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81. Coca-Cola leased land and built a bottling operation in Turkey. This new facility is best described as a(n) a. greenfield venture. b. cross-border acquisition. c. international transplant. d. duplication strategy. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 82. From a company-owned plant in Pakistan, Howard manufactures specialty apparel items for his small business, Garments of Eden. Because of overseas operations of the U.S. military in the region, Howard fears that his plant may be sabotaged or that the local government may attempt to take over the facility. Specifically, his fears are about _____ risk. a. economic b. exchange rate c. political d. military ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 83. The risk that a new government regulation could damage business activity in a country is considered _____ risk. a. political b. economic c. exchange rate d. global Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 84. When the exchange rate for a currency rises relative to that of another country, the rising currency a. has decreased in value relative to the other currency. b. has increased in value relative to the other currency. c. has been devalued by its government. d. reflects increased political risk in its home country. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 85. A small company can deal with changing currency rates by a. stating contracts in U.S. dollars as opposed to the foreign currency. b. locating all plants in countries with the most advantageous exchange position. c. limiting sales in each country so as to reduce exposure to any one currency. d. following the advice of the international sales manager. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 86. Which of the following countries would be the least challenging in its ease of doing business according to the World Bank's index? a. Argentina b. Egypt c. Chile d. Madagascar ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:37 AM 87. The Federation of International Trade Associations website is a source of trade a. intermediaries. b. leads. c. missions. d. contracts. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM Copyright Cengage Learning. Powered by Cognero.

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88. An intermediary that works for foreign firms that are interested in buying U.S. products and is paid a commission for its services is called a(n) a. export agent. b. export trading company. c. piggyback marketer. d. confirming house. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM 89. Melanie's Marbles is a young company that buys unusual marbles from many places around the world. To provide assurance to vendors that they will be paid, Melanie's Marbles has established a(n) _____ at its bank. a. international invoice b. bill of lading c. letter of confirmation d. letter of credit ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM 90. Once an exporter has shipped a product internationally and the title has been transferred, the exporter receives a(n) a. international invoice. b. bill of lading. c. letter of confirmation. d. letter of credit. ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Legal Responsibilities KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM 91. Which of the following government organizations is an excellent source of information about analyzing markets, financing, and planning strategy? a. TradePort b. Small Business Administration c. Export Assistance Center d. U.S. Department of Commerce ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM 92. What questions related to the topics of management objectives, management experience and resources, production capacity, and financial capacity should an entrepreneur consider when assessing his or her readiness for going global? ANSWER: The following are important questions that entrepreneurs should consider when assessing their readiness for the challenges of global business: Management Objectives • • •

What are the company's reasons for going global? How committed is top management to going global? How quickly does management expect its international operations to pay off?

Management Experience and Resources •

What in-house international expertise does the firm have (international sales experience, language skills, etc.)?

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• • •

Who will be responsible for the company's international operations? How much senior management time should be allocated to the company's global efforts? What organizational structure is required to ensure success abroad?

Production Capacity • • •

How is the present capacity being used? How much additional production capacity will be needed at home and abroad? What product designs and packaging options are required for international markets?

Financial Capacity • • • •

How much capital can be committed to international production and marketing? Will the company be able to cover the initial expenses of going global (e.g., the costs of finding customers abroad, expanding production to support international sales)? What other financial demands might compete with plans to internationalize? By what date must the global effort pay for itself?

POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:51 PM 93. Dustin owns a small Web design company and has decided to expand his operations globally. What is the next step that Dustin should take in order to ensure a successful entry into the global market? ANSWER: Once small business owners decide to expand internationally, they should study the social, technological, economic, and political forces in foreign markets to figure out how best to adapt their business practices, as well as their product or service, to local circumstances, and make other adjustments that are necessary to ensure smooth market entry. POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-1 Small Businesses as Global Enterprises QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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94. Identify each of the four driving forces that encourage entrepreneurs to go global, and discuss the change in traditional to emerging perspectives. ANSWER: Although the motives for global expansion vary, these basic forces can be divided into four general categories. Within each category fall some tried and true motivations, as well as some newer perspectives that have emerged in more recent years. 1. Expanding markets. A traditional motivation would be using international expansion to extend a product's life cycle, but an emerging motivation is to find buyers for highly specialized products. 2. Gaining access to resources. A traditional motivation would be to obtain raw materials, but an emerging motivation is to find skilled labor. 3. Cutting costs. A traditional motivation would be to reduce labor costs, but an emerging motivation is to reduce tariffs. 4. Capitalizing on special features of location. A traditional motivation would be to profit from unique locations, but an emerging motivation is to follow large client firms that locate abroad. POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-2 The Primary Forces Driving Global Businesses QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:55 PM 95. Describe six strategies that a small firm can use to go global. ANSWER:

Strategy options for global firms include the following: 1. Exporting. Exporting involves the sale of products produced in the home country to customers in another country 2. Importing. Importing involves selling products from abroad in the firm's home market 3. Foreign licensing. Foreign licensing allows a company in another country to purchase the rights to manufacture and sell a different firm's products in overseas markets. The firm buying these rights is called the licensee. The licensee makes payments to the licensor, or the firm selling those rights, normally in the form of royalties, which is a fee paid for each unit produced. 4. International franchising. With international franchising, the franchisor offers a Copyright Cengage Learning. Powered by Cognero.

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standard package of products, systems, and management services to the franchisee, which provides capital, market insight, and hands-on management 5. International strategic alliances. An international strategic alliance allows firms to share risks and pool resources as they enter a new market, usually matching the local partner's understanding of the target market (culture, legal system, competitive conditions, etc.) or its access to low-cost labor with the technology or product knowledge of its alliance counterpart. 6. Locating facilities abroad. A small business may choose to establish a foreign presence of its own in strategic markets, especially if the firm has already developed an international customer base. Most small companies start by locating a production facility or sales office overseas, often as a way to reduce the cost of operations. POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:56 PM 96. Provide some guidelines for an entrepreneur who is considering importing as a strategy for going global. ANSWER: • Learn as much as you can about the culture and business practices of the country from which you will be sourcing to avoid making deal-breaking mistakes. • Do your research, and be sure to select a source that is not a competitor or a company that hopes to learn from your operations in order to compete against you in the future. • Protect your intellectual property so that your suppliers cannot easily take it from you. Consider requiring your sourcing partners to sign nondisclosure agreements so that they cannot patent the item in the country where the sourcing takes place. • Don't rush the process of forming a relationship with a sourcing partner. Take time to ask difficult questions about important factors such as quality standards and capabilities, manufacturing flexibility, and time to order fulfillment. • Work out transportation logistics ahead of time. POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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97. Polly has formed an agreement with a French company to produce and sell her scarves in their 10 stores across Europe. The scarves are Polly's original designs and are of different colors and fabrics. The company will then pay Polly a fee for each scarf they produce. What are the advantages and disadvantages of the globalization strategy Polly will be utilizing? ANSWER: Polly is participating in foreign licensing where the French company will sell scarves across Europe after purchasing the rights to do so. Polly's company is considered the licensor, and the rights will be paid for in the form of royalties. Advantages This method of expansion is the least expensive way to go global, since the licensee bears all the costs and risks related to setting up a foreign operation. Foreign licensing can also be used to protect again counterfeit activity, because having the French company as a local presence can help ensure that other firms do not use Polly's designs in an inappropriate way. Disadvantages The French company would make all the production and marketing decisions, and Polly must share returns from international sales with the French company. POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-3 Strategy Options for Global Firms QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 10:58 PM 98. Nicole is the CEO of a small business that is looking to expand globally. She wants to move her business to a European country and feels that is where the product will be most profitable. What are three challenges that Nicole needs to analyze for the area in which she is considering expanding her company? How could Nicole possibly deal with these challenges? ANSWER: 1. Political risk. The potential for a country's political forces to negatively affect the performance of businesses operating within its borders is referred to as political risk. Often, this risk is related to the inability of a host nation's government. Potential problems range from threats as trivial as new regulations that restrict the content of television advertising to a government takeover of private assets. Political developments can threaten access to an export market, require a firm to reveal trade secrets, or even demand that all work be completed in-country. Many large corporations maintain a risk assessment office with staff trained to determine the risk profile of the individual countries for which they have planned projects. However, because Nicole most likely cannot afford the cost of staffing such an office, she could turn to inexpensive tools for risk assessment. One helpful resource is Euromoney magazine's annual "Country Risk Rankings," which provides a general sense of the political risks that companies will face when doing business abroad. By using these insights, Nicole could develop an international growth plan and make Copyright Cengage Learning. Powered by Cognero.

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appropriate adjustments to her strategy. 2. Economic risk. Economic risk is the probability that a country's government will mismanage its economy and affect the business environment in ways that hinder the performance of firms operating there. Two of the most serious problems resulting from economic mismanagement are inflation and fluctuations in exchange rates. Inflation reduces the value of a country's currency on the foreign exchange market, thereby decreasing the value of cash flows that the firm receives from its operations abroad. Exchange rates represent the value of one country's currency relative to that of another country. Sudden or unexpected changes in these rates can be a serious problem for small international businesses. To protect against exchange rate shifts, Nicole could choose to state her contract in U.S. dollars. She could also use more sophisticated financial strategies and risk management tools, including forward contracts and options. 3. Ease of doing business. This challenge includes the difficulty of starting a business, getting credit, and enforcing contracts. The World Bank's "Ease of Doing Business Index" should be consulted to determine countries with greater regulatory conditions on economic growth and development. POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-4 Challenges to Global Businesses QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.04 - LO: 18-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Environmental Influence KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM 99. What five countries have the greatest commercial potential for an entrepreneur who is considering going global? ANSWER: Because the primary motivation for going global is to develop market opportunities outside the home country, the focus of globalization strategies tends to be on countries with the greatest commercial potential. In the past, these were developed countries, with high levels of widely distributed wealth. In more recent years, small companies have been paying greater attention to emerging markets, where income and buying power have been growing more rapidly. The term BRICS is often used to refer to five major emerging economies: Brazil, Russia, India, China, and South Africa. These markets have definitely captured the attention of many entrepreneurs for quite some time. And that interest continues to grow, as mainstay markets like Europe, Japan, and the United States expand at modest rates while growth in China and India, in particular, remain high when compared to their more developed counterparts—and by quite a margin. The other BRICS countries (Brazil, Russia, and South Africa) have struggled some in recent years, but their outlook has improved as demand for commodities has increased. Because of their immense populations and potential market demand, China and India have become the focus of many international firms. Combined, these two nations account for an astounding 40 percent of the world's 7.4 billion inhabitants, thus providing fertile ground for international expansion. POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-2 The Primary Forces Driving Global Businesses Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 11:01 PM 100. Describe the role that trade intermediaries play in assisting small businesses that choose to go global. Identify the types of trade intermediaries that are most suited for small businesses. ANSWER: Perhaps the easiest way to break into international markets is to use a trade intermediary, which is an agency that distributes a company's product to international customers on a contract basis. These agencies can tap their established network of contacts, as well as their local cultural and market expertise. In short, the intermediary can manage the entire export end of the business, taking care of everything except filling the orders. The following types of trade intermediaries are most likely to provide the services that small businesses will require when they go global: • • • • •

Confirming houses (buying agents) Export management companies Export trading companies Export agents, merchants, or remarketers Piggyback marketers

POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/1/2019 11:04 PM 101. A group of four Kentucky business owners all in business in the international equine industry fly to Ireland to meet potential buyers. Describe what this group would be hoping to accomplish from the trip. ANSWER: The Kentucky group is participating in a trade mission, which is a trip organized to help small business owners to meet with potential foreign buyers. The goal is to introduce the four U.S. firms to prospective Irish buyers and establish strategic alliances specific to Kentucky and Ireland's equine industries. This group would probably have paid their own expenses and share in the operating costs of the trip; however, foreign governments sometimes sponsor trade missions in order to promote business links with U.S. firms. The hope is the Kentucky and Irish companies can start a business relationship. Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Hard REFERENCES: 18-5 Assistance for Global Enterprises QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM Match the term with its definition. a. economic risk b. experience curve efficiencies c. foreign licensing d. international franchising e. international outsourcing f. international strategic alliance g. learning effects h. licensee i. licensor DIFFICULTY: Easy REFERENCES: 18-2 The Primary Forces Driving Global Businesses 18-3 Strategy Options for Global Firms QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.02 - LO: 18-2 SMAL.LONG.20.18.03 - LO: 18-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM 102. A strategy that involves accessing foreign business operations through contracts with independent providers ANSWER: e POINTS: 1 103. Per-unit savings gained from the repeated production of the same product ANSWER: b POINTS: 1 104. Insights, gained from experience, that lead to improved work performance ANSWER: g Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 105. The company selling licensing rights ANSWER: i POINTS: 1 106. A strategy to sell a standard package of products, systems, and management services to a company in another country ANSWER: d POINTS: 1 107. The company buying licensing rights ANSWER: h POINTS: 1 108. A strategy that allows a company in another country to purchase the rights to manufacture and sell a different company's products in international markets ANSWER: c POINTS: 1 109. An organizational relationship that allows companies in different countries to pool resources and share risks as they enter new markets ANSWER: f POINTS: 1 Match the term with its definition. a. cross-border acquisition b. exporting c. globalization d. greenfield venture e. importing f. offshoring g. trade intermediary h. trade mission DIFFICULTY: Easy REFERENCES: 18-0 Global Opportunities for Small Businesses 18-1 Small Businesses as Global Enterprises 18-2 The Primary Forces Driving Global Businesses 18-3 Strategy Options for Global Firms 18-5 Assistance for Global Enterprises QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.00 - LO: 18-0 SMAL.LONG.20.18.01 - LO: 18-1 SMAL.LONG.20.18.02 - LO: 18-2 SMAL.LONG.20.18.03 - LO: 18-3 SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Strategy Bloom's: Remember 8/29/2018 11:26 AM 12/31/2018 10:38 AM

110. A wholly owned subsidiary formed from scratch in another country ANSWER: d POINTS: 1 111. An agency that distributes a company’s products on a contract basis to customers in another country ANSWER: g POINTS: 1 112. The purchase by a business in one country of a company located in another country ANSWER: a POINTS: 1 113. A trip organized to help small business owners meet with potential foreign buyers and establish strategic alliances in an international market ANSWER: h POINTS: 1 114. A strategy that involves relocating operations abroad ANSWER: f POINTS: 1 115. Selling products produced in the home country to customers in another country ANSWER: b POINTS: 1 116. Selling products produced in another country to buyers in the home country ANSWER: e POINTS: 1 117. The expansion of international business, encouraged by converging market preferences, falling trade barriers, and the integration of national economies ANSWER: c POINTS: 1 Match the term with its definition. a. bill of lading b. born-global firms c. counterfeit activity d. economies of scale e. exchange rate f. letter of credit g. political risk h. royalties Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: REFERENCES:

Easy 18-1 Small Businesses as Global Enterprises 18-2 The Primary Forces Driving Global Businesses 18-3 Strategy Options for Global Firms 18-4 Challenges to Global Businesses 18-5 Assistance for Global Enterprises QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.18.01 - LO: 18-1 SMAL.LONG.20.18.02 - LO: 18-2 SMAL.LONG.20.18.03 - LO: 18-3 SMAL.LONG.20.18.04 - LO: 18-4 SMAL.LONG.20.18.05 - LO: 18-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Environmental Influence Legal Responsibilities Operations Management Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 12/31/2018 10:38 AM 118. The unauthorized use of a company's intellectual property or manufacture of its products ANSWER: c POINTS: 1 119. Efficiencies from expansion of production that result from spreading fixed costs over more units of output ANSWER: d POINTS: 1 120. A document indicating that a product has been shipped and the title to that product has been transferred ANSWER: a POINTS: 1 121. An agreement issued by a bank to honor a draft or other demand for payment when specified conditions are met ANSWER: f POINTS: 1 122. Small companies launched with cross-border business activities in mind ANSWER: b POINTS: 1 123. Fees paid by the licensee to the licensor for each unit produced under a licensing contract ANSWER: h POINTS: 1 124. The potential for political forces in a country to negatively affect the performance of businesses operating within its borders ANSWER: g Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1

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Chapter 19 - Professional Management and the Small Business 1. Individuals who are launching promising startups need to have a "tolerance for ambiguity." a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 2. A flashy, highly charismatic personality is required to be an effective leader. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 3. Top-level executives in a large corporation have a distinct advantage over the leader of a small business in exerting their influence. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 4. A company's culture unfolds over the lifetime of the business and usually reflects the character and style of the founder. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 5. A consultant beginning to ask employees for their marketing ideas illustrates empowerment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Leadership Principles KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:34 AM 6. Research has shown that, surprisingly, relatively simple adjustments in physical space do not have much effect on the mindset that employees assume at work. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 7. The challenge for small firm leaders is to develop a professional approach to management, while still retaining the entrepreneurial spirit of the enterprise. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 8. When a small business expands beyond the comfort zone of its entrepreneur, bankruptcy is all too often the final outcome. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Understand 8/29/2018 11:26 AM 1/4/2019 8:26 AM

9. Once an organizational structure and pattern of management has been established, it should remain static in order for the business to become established and grow. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 10. When a firm reaches Stage 2 of small business growth, the entrepreneur engages extensively in both the coordination of the efforts of others as well as performing basic work activities. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 11. The formal organization stage of business growth is a turning point for a small firm, because the entrepreneur must rise above direct, hands-on management and work through an intervening layer of management. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 12. Stage 4 of small business growth involves the use of budgets, personnel practices, organizational charts, and control procedures. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 13. Small firms that hesitate to move through the various organizational stages and acquire the necessary professional management often limit their rate of growth. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:26 AM 1/4/2019 8:26 AM

14. As a firm moves from Stage 1 to Stage 4 of small business growth, the small business owner becomes less of a leader and manager and more of a doer. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 15. Most entrepreneurs typically overdo the amount of planning. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 16. Budgets are usually prepared for five years in advance using quarterly figures. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 17. In very small companies, the organizational structure tends to evolve with little conscious planning. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 18. Most very small firms use an organizational structure in which each person reports to one supervisor. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 19. The maximum number of employees who can be supervised effectively by a capable manager is four. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 20. A manager who grants subordinates the right to act or make decisions is delegating authority. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 21. Periodic performance review sessions for a company following two-way communication between managers and employees would discuss employees' ideas, questions, complaints, and job expectations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:26 AM 1/4/2019 8:26 AM

22. Entrepreneurs who follow a win-win negotiating strategy try to find a solution that will satisfy at least the basic interests of both parties. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 23. A positive solution should be pursued in negotiations whenever it is feasible to do so. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 24. Many small business owners seldom work more than 40 hours a week. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-4 Personal Time Management QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 25. The greatest time saver is the effective use of time. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-4 Personal Time Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 26. Preparing a daily written plan of work activities is useful in deciding which tasks deserve highest priority. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-4 Personal Time Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 27. The first step in time management should be to divide your tasks into categories of "important" and "not important." a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-4 Personal Time Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 28. The Service Corps of Retired Executives (SCORE) program offers entrepreneurs management advice for a small fee. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 29. Showing up at an event and handing out a lot of business cards is an effective form of networking. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

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30. Small business development centers (SBDCs) provide a wide range of services, including business plan consultation and export and import support, but they do not help with market research or financial lending assistance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 31. Leadership roles differ greatly, depending on the size of the business and a. its stage of development. b. its product and service offerings. c. its marketing efforts. d. the industry in which the company operates. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 32. Leadership in most small firms is more _____ in comparison to the leadership in large corporations. a. haphazard b. impersonal c. personal d. skillful ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:35 AM 33. Which of the following type of leadership styles focuses on building consensus through participation? a. Populist b. Visionary c. Coach d. General ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 34. Barry's expectation that employees will complete his requests immediately is typical of _____ leaders. a. populist b. general c. paragon d. visionary ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Leadership Principles Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Apply 8/29/2018 11:26 AM 1/4/2019 8:26 AM

35. Linda's high standards and expectations of employee excellence is typical of _____ leaders. a. visionary b. general c. populist d. paragon ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Leadership Principles KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 36. Workers who act on their own and make decisions about the processes they're involved with are considered to be a. nascent managers. b. empowered employees. c. policy-capable subordinates. d. work-team ready. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 37. Which of the following determines the "feel" of a business and is the "silent teacher" that sets the mood for employee conduct? a. Organizational culture b. Organizational structure Copyright Cengage Learning. Powered by Cognero.

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c. Delegation of authority d. The employer's leadership style ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Group Dynamics KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 38. Entrepreneur Danny Meyer's own unique management approach, which involves moving things "back to center," nudging employees in the right direction to keep them motivated in a positive way, and insisting on excellent performance, is called a. constant, urging reminding. b. constant, gentle pressure. c. employee empowerment. d. a team-builder style. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 39. Greater firm profitability results from engaged employees because they a. feel less threatened. b. are more productive and customer-focused. c. focus on important features of the business. d. require less supervision. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Motivation Concepts KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 40. If Elizabeth, who just hired her first employee, desires to create an innovative cultural environment within the business, what should she do? a. Support experimentation while eliminating unnecessary penalties for failure. b. Maintain tight control of all aspects of the business. c. Reject employee ideas. d. Treat all employees the same. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Motivation Concepts KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:36 AM 41. Founders are least likely to be described as a. creative. b. a good organizational member. c. innovative. d. risk-taking. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

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42. A corporate marketing executive is moving to a managerial position in a small firm, where she may logically expect to find a _____ of cash and an _____ number of support staff. a. surplus; adequate b. shortage; inadequate c. surplus; inadequate d. shortage; adequate ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 43. John, a small business operations manager, is confronted with a quality problem. A typical small business handicap that will hamper his efforts to solve the problem is a lack of a. time. b. chain of command. c. accounting data. d. specialized staff assistance. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 44. Stage 2 in the growth of a business is characterized by a. a one-person operation. b. hands-off management practices. Copyright Cengage Learning. Powered by Cognero.

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c. a multi-layered organization. d. the entrepreneur as a player-coach. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 45. Mario has just begun to personally supervise employees. His firm is likely to be in the _____ stage of growth. a. formal organization b. intermediate supervision c. one-person operation d. player-coach operation ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:37 AM 46. Susan has seen her retail shop grow to the point that she has designated supervisors for the office and two selling areas. Which of the following stages of small business growth is her shop in? a. Formal organization b. Intermediate supervision c. One-person operation d. Player-coach operation ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 47. Margaret has launched a new event planning company with four employees. With the growth in sales and personnel, the next stage of growth will involve a. increased direct supervision. b. improved quality management. c. intermediate supervision. d. more formal policies. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 48. The use of written policies, budgets, and job descriptions is most closely associated with which of the following stages of small business growth? a. Formal organization b. Intermediate supervision c. One-person operation d. Player-coach operation ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember Copyright Cengage Learning. Powered by Cognero.

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49. A hesitancy by an entrepreneur to move through the various organizational stages can a. limit the rate of business growth. b. be interpreted as evidence of creativity. c. normally provide a competitive edge to the firm. d. provide a spark to the business because of the spontaneity it introduces. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 50. From Stage 1 to Stage 4 of small business growth, the small business owner becomes less of a _____ and more of a _____. a. manager; doer b. consultant; doer c. manager; visionary d. doer; leader ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 51. A firm's basic path to the future is spelled out in a document called a a. feasibility study. b. short-range plan. c. budget. Copyright Cengage Learning. Powered by Cognero.

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d. strategic plan. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 52. A monthly production schedule is prepared as part of a(n) _____ plan. a. operational b. short-range c. strategic d. tactical ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 53. A budget is prepared as part of a(n) _____ plan. a. strategic b. short-range c. organizational d. long-range ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 54. A budget is usually prepared _____ in advance, with a breakdown of figures for each _____. a. two years; quarter b. five years; year c. one year; quarter d. six months; month ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 55. Managers who can easily become distracted by fighting the everyday fires of business and, in the process, ignore or postpone planning succumb to what is sometimes called a. "Parkinson’s law of planning." b. the "Peter principle." c. the "tyranny of the urgent." d. "Murphy’s law of strategic action." ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:38 AM Copyright Cengage Learning. Powered by Cognero.

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56. The organizational structure of small companies is often characterized by a. economy. b. clarity. c. practicality. d. use of staff positions. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 57. An organization in which the primary channel of communication is rigid will a. be efficient. b. fail. c. be chaotic. d. be bureaucratic. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 58. Frequent and flagrant disregard of the chain of command undermines the position of the a. founder. b. operative employee. c. staff specialist. d. bypassed manager. ANSWER: d POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 59. Most very small firms use a _____ organization. a. functional b. line c. line-and-staff d. committee ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 60. What is the difference between a line organization and a line-and-staff organization? a. A line-and-staff structure has staff specialists who perform specific services or act as management advisers in particular areas. b. In a line-and-staff organization, each person may report to more than one supervisor. c. Line organizations are used in large firms, whereas most very small firms use a line-and-staff organization. d. The span of control in a line organization is larger than the span of control in a line-and-staff organization. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Analyze 8/29/2018 11:26 AM 1/4/2019 8:26 AM

61. Nancy just added her eighth employee, a human resource manager who will be responsible for all future hiring, training, retaining, and firing decisions. The company is using a _____ organizational structure. a. delegated b. line-and-staff c. line d. span of control ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 62. James is talking to another supervisor about the number of employees that he supervises. James is talking about a. his span of control. b. the informal organization. c. the organizational structure. d. his chain of command. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 63. In order for an individual to supervise effectively, what is the optimal span of control? a. Two to four people Copyright Cengage Learning. Powered by Cognero.

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b. Four to six people c. No more than 10 people d. It depends on a number of factors. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 64. Scott, a printing shop owner, believes that his business is running rather haphazardly and wants to get it under control. The first step he should take is to a. take corrective action. b. set standards. c. increase inspection. d. increase two-way communication. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 65. Vivian would like to improve two-way communication with her subordinates. Which of the following ideas would be most helpful to her? a. Give orders and have employees carry them out. b. Announce daily production requirements over the public address system. c. Engage employees in conversations to openly share ideas and problems. d. Manage by walking around. ANSWER: c POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 66. Kathleen believes she could be more efficient in the use of her time. To determine where improvements can be made, Kathleen should first a. list long-term objectives. b. record the amounts of time she spends on various activities during the day. c. list projects that need attention. d. assign priorities to unfinished tasks. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-4 Personal Time Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Individual Dynamics KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 67. Effective time management requires a. firmly established priorities. b. self-discipline. c. using a good time management system. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-4 Personal Time Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Understand 8/29/2018 11:26 AM 1/4/2019 9:31 AM

68. Which time management suggestion would be the most critical for a small business owner? a. Set aside time to work undisturbed. b. Have a daily written plan and highlight priorities. c. E-mail, cell phones, and the Internet should be used to save time, not be a distraction. d. Complete trivial tasks first to have something completed. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-4 Personal Time Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 69. SCORE refers to a. the grade assigned to a small firm by the Small Business Administration. b. the management knowledge possessed by an entrepreneur. c. a group of retired executives who act as consultants to small business owners. d. an alliance of small firms for the purpose of bidding on government contracts. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 70. Small business service organizations that are patterned after the Agricultural Extension Service are known as a. student consulting team programs. b. Small Business Development Centers (SBDCs). c. business incubators. Copyright Cengage Learning. Powered by Cognero.

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d. Service Corps of Retired Executives (SCORE). ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 71. Which of the following is a reason why many small firm managers are reluctant to use outside advisers? a. An outsider could never truly understand the business. b. Bringing in an outside adviser would cost too much. c. The manager can solve problems themselves. d. All of these are correct. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 9:32 AM 72. The consulting resources of universities are made available to small business firms by a. student consulting teams. b. SCORE. c. business incubators. d. management consultants. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 73. Entrepreneurs can gain management assistance from peers through a. outside consultants. b. SCORE advisors. c. volunteer work in the community. d. networking. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Strategy KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 74. Marvin has just launched a consulting business. Business has been slower than expected. What advice would you give Marvin? a. Post an ad in the local newspaper. b. Tap into his personal and professional network. c. Find a different line of work. d. Take a full-time position with a company while he builds his business part-time. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Strategy KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM Copyright Cengage Learning. Powered by Cognero.

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75. For six leadership styles, briefly state how each type of leader operates. ANSWER: 1. The visionary mobilizes people toward a shared vision. 2. The coach develops people, establishing a relationship and trust. 3. The team builder promotes emotional bonds and organizational harmony. 4. The populist builds consensus through participation. 5. The paragon sets challenging and exciting standards and expect excellence. 6. The general demands immediate compliance. POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:39 AM 76. Jenny is the owner-manager of a small accounting practice. She holds biweekly employee meetings to cover company goals, focus points for the future, and keep the employees updated on current tax changes. She has developed significant bonds with the employees, so they share work (and personal) problems with her more than in the past. Often Jenny can be found assisting new clients and aiding in paperwork completion, especially around April 15. What type of leadership style(s) does Jenny display and how? ANSWER: Jenny displays the following types of leadership: • •

•

Visionary leadership. By holding company meetings on business goals, Jenny displays this she has a shared clear vision for the business. Team builder leadership. Because Jenny is involved enough with the employees that they share problems with her, an emotional bond has been forged. Organizational harmony is strengthened with her working with clients when it is a busy time for the company. Coaching leadership. Jenny has developed close bonds with the employees to where they trust her when sharing their problems. Because she also keeps them informed about changes, she also helps them become better at their jobs.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Group Dynamics KEYWORDS: Bloom's: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:26 AM 1/4/2019 8:26 AM

77. Discuss what makes a leader effective. ANSWER: Effective leadership is based not on a larger-than-life personality but, instead, on guiding a company toward constructive business accomplishments. Effective leadership is not so much about wanting to be in charge as it is about having the ability to take charge by setting the right priorities, finding good people and sorting them into the right roles, and then making the relationships work for everyone involved. An effective leader also needs to be committed to serving as a role model so that others will feel motivated to follow. POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-1 Small Business Leadership QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics Leadership Principles KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:40 AM 78. Describe the four stages of small business growth and how the owner would function. ANSWER: Stage 1: One-Person Operation. While some firms begin with a larger organization, many businesses remain at this stage indefinitely. The entrepreneur is intensely involved in operations. Stage 2: Player-Coach Operation. The entrepreneur becomes a player-coach, which implies continuing active participation in business operations. In addition to performing the basic work—whether making the product, selling it, writing checks, keeping records, or other activities—the entrepreneur must also coordinate the efforts of others. Stage 3: Intermediate Supervision. In many ways, this stage is considered a turning point for a small firm, because the entrepreneur must rise above direct, hands-on management and work through an intervening layer of management. Stage 4: Formal Organization. This stage entails the adoption of written policies, preparing plans and budgets, standardizing personnel policies, computerizing records, putting together organizational charts and job descriptions, scheduling training conferences, setting up control procedures, and so on. While some formal managerial practices may be adopted prior to Stage 4, these steps outline a typical pattern of development for successful firms. Flexibility and informality may be helpful when a business is first started, but growth requires greater formality in planning and control. The entrepreneur will need to demonstrate great skill if he or she wants to preserve a "family" atmosphere while introducing professional management. POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:41 AM 79. Andrea designed a new household cleaning product that can be used on any surface, is environmentally friendly, and performs better than other current products. As the company grew, she added employees to produce the cleaner. Recently, a grocery store chain asked to sell the cleaner in a regional area. Should Andrea continue as the CEO? At what level is the company in its development? What factors should Andrea consider as the company continues to grow? ANSWER: The company is currently at a turning point and is at the point when professional management should be considered. Andrea should continue as CEO, but she may need to hire someone to complement her weaker areas and take the company past its Stage 2 (PlayerCoach) level. Fulfilling the grocery store order successfully will help the company move to Stage 3 and then to Stage 4. However, the company culture needs to be maintained while addressing the need for additional, specialized employees. POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-2 The Small Firm Management Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.02 - LO: 19-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:41 AM 80. Discuss span of control, including what it is, what factors affect the span of control, and what the optimal span of control for a small firm is. ANSWER: The span of control is the number of employees who are supervised by a manager. Although some experts have stated that six to eight people are all that one individual can supervise effectively, the optimal span of control is actually a variable that depends on a number of factors. Among these factors are the nature of the work and the manager's knowledge, energy, personality, and abilities, as well as the extent and effectiveness of the use of communication tools in the organization. In addition, if the abilities of subordinates are better than average, the span of control may be broadened accordingly.

POINTS: DIFFICULTY: REFERENCES:

As a very small firm grows and adds employees, the small business owner's span of control is extended. Eventually, the attempted span of control exceeds the entrepreneur's reach, demanding more time and effort than she or he can devote to the business. It is at this point that the entrepreneur must establish intermediate levels of supervision and dedicate more time to management, moving beyond the role of player-coach. 1 Hard 19-3 Managerial Responsibilities of Entrepreneurs

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QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:42 AM 81. The personal shopper business that Jeff and Christy have developed has grown, so they are busy 50 hours weekly. This schedule leaves little time for them as a couple. They have decided to hire outside employees to take over some of their business responsibilities. What suggestions should they follow to ease this transition? ANSWER: To ease the transition, Jeff and Christy should: • • • • • •

Accept the fact that they will not be able to make all of the decisions anymore. Prepare themselves emotionally for the loss of control that small business owners feel when they first start to delegate. Manage carefully the process of finding, selecting, hiring, and retaining employees who are trustworthy enough to handle greater responsibility. Start by delegating those functions that they don't do well and are most comfortable giving up. Even then, they should continue to provide reasonable oversight to smooth the transition and to ensure the quality of the work. Write job descriptions, and coach those who are taking over new responsibilities so that they can master required skills. Focus on results, and give subordinates the flexibility to carry out assignments.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Leadership Principles KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 8:26 AM 82. List some tools and techniques that can be used to stimulate two-way communication between managers and employees. ANSWER: Many practical tools and techniques can be used to stimulate two-way communication between managers and employees. • •

Periodic performance review sessions to discuss employees' ideas, questions, complaints, and job expectations. Physical or virtual bulletin boards to keep employees informed about developments affecting them and/or the company.

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• • • • • •

Blogs for internal communication, especially in companies that have open organizational cultures and truly want transparent dialogue. Microblogging tools (like Twitter and Yammer) to enable employees to communicate, collaborate, and share brief thoughts and observations about the business in real time. Physical or virtual suggestion boxes to solicit employees' ideas on possible improvements. Wikis set up to bring issues to the surface and draw feedback from employees. Formal staff meetings to discuss problems and matters of general concern. Breakfast or lunch with employees to socialize and just talk.

These methods and others can be used to supplement the most basic of all channels for communication—the day-to-day interactions between each employee and his or her supervisor. POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Individual Dynamics KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:43 AM 83. Suggest some solutions for better time management. ANSWER: • Analyze how much time is normally spent on various activities. • Identify and limit chronic "time wasters." • Use a daily written plan of work activities with highlighted, firmly established priorities. • Get a good time management system and use it. • Try to make meetings more efficient. • Unsubscribe from magazines and catalogues that are never read. • Create a file folder for active projects. • Keep desk and office organized. • Use deadlines to promote focus. • Manage e-mail effectively. • Set aside time to work undisturbed. POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-4 Personal Time Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.04 - LO: 19-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Individual Dynamics Bloom's: Understand 8/29/2018 11:26 AM 1/4/2019 10:44 AM

84. Discuss the types of outside management assistance available to small business owners. ANSWER: Entrepreneurs seeking management assistance can turn to any number of sources. •

•

• •

U.S. Small Business Administration (SBA). The SBA is an important source of information and support for small companies, and it is often the first place that small business owners turn for help. The SBA sponsors the Service Corps of Retired Executives (SCORE) and Small Business Development Centers (SBDCs). SCORE is a group of working and retired executives who give free advice to small business owners. SBDCs provide a wide range of services, including business plan consultation, export and import support, help with market research, and financial lending assistance. Educational Institutions and Foundations. Another source of management assistance comes from educational institutions and foundations. Many colleges and universities have student consulting teams willing to assist small businesses. Teams of upperclass and graduate students, under the direction of a faculty member, work with owners of small ventures in analyzing their business problems and proposing appropriate solutions to them. Management Consultants and Networking. Assistance may also be obtained by engaging management consultants and by networking with other small business owners. Other Business and Professional Services. A variety of other business and professional groups provide management assistance. In many cases, such assistance is part of the business relationship. Sources of management advice include bankers, certified public accountants (CPAs), attorneys, insurance agents, suppliers, trade associations, and chambers of commerce.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 19-5 Outside Management Assistance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.19.05 - LO: 19-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:46 AM Match the term with its definition. a. budget b. chain of command c. delegation of authority d. empowerment Copyright Cengage Learning. Powered by Cognero.

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e. line-and-staff organization f. line organization g. long-range plan (strategic plan) h. negotiation i. networking j. professional manager k. Service Corps of Retired Executives (SCORE) l. short-range plan m. Small Business Development Centers (SBDCs) n. span of control DIFFICULTY: Easy REFERENCES: 19-1 Small Business Leadership 19-2 The Small Firm Management Process 19-3 Managerial Responsibilities of Entrepreneurs QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.19.01 - LO: 19-1 SMAL.LONG.20.19.02 - LO: 19-2 SMAL.LONG.20.19.03 - LO: 19-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Leadership Principles Group Dynamics Individual Dynamics Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/4/2019 10:47 AM 85. The official, vertical channel of communication in an organization ANSWER: b POINTS: 1 86. A firm’s overall plan for the future ANSWER: g POINTS: 1 87. A document that expresses future plans in monetary terms ANSWER: a POINTS: 1 88. Authorization of employees to make decisions or take actions on their own ANSWER: d POINTS: 1 89. A plan that governs a firm’s operations for one year or less ANSWER: l POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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90. The process of granting to subordinates the right to act or make decisions ANSWER: c POINTS: 1 91. The process of developing and engaging in mutually beneficial relationships ANSWER: i POINTS: 1 92. SBA-sponsored centers offering consulting, education, and other support to small business owners ANSWER: m POINTS: 1 93. The process of developing workable solutions through discussions or interactions ANSWER: h POINTS: 1 94. An SBA-sponsored group of working and retired executives who give free advice to small business owners ANSWER: k POINTS: 1 95. An organizational structure that includes staff specialists who assist management ANSWER: e POINTS: 1 96. The number of employees who are supervised by one manager ANSWER: n POINTS: 1 97. A simple organizational structure in which each person reports to one supervisor ANSWER: f POINTS: 1

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Chapter 20 - Managing Human Resources 1. Human resource management of small firms should be identical to large companies but adjusted for size. a. True b. False ANSWER: False RATIONALE: Small businesses cannot duplicate the personnel programs of such industry giants, but they can adopt approaches that work best for small firms. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-0 Managing Human Resources QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.00 - LO: 20-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 2. The goal of recruitment is to obtain a pool of applicants large enough to contain a number of talented prospects. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 3. The quality of a firm’s employees determines the firm’s potential. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 4. Payroll is only a moderate expense for most small businesses. a. True b. False ANSWER: False RATIONALE: Payroll is one of the largest expense categories for most businesses. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 5. Universities are good sources for interns, a source of inexpensive part-time help for the present and the inside track on hiring high performers as full-time employees after they graduate. a. True b. False ANSWER: True RATIONALE: Universities and other schools are desirable sources of personnel for positions that require no specific work experience. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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6. Public employment offices are a useful source of clerical workers, unskilled laborers, production workers, and technicians. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 7. Private employment agencies administer the various state unemployment insurance programs. a. True b. False ANSWER: False RATIONALE: It is public employment offices that administer the various state unemployment insurance programs, and these offer employment assistance to small businesses at no cost. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 8. The fees charged by a private employment agency are paid by the hiring firm, not the applicant. a. True b. False ANSWER: False RATIONALE: The fees are more often paid by the hiring firm but can also be paid by the applicant in some cases. POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 9. Temporary help agencies are good sources of employees when extensive training is required. a. True b. False ANSWER: False RATIONALE: Staffing with temporary employees is less practical when extensive training is required. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 10. The use of temporary employees provides management with an introduction to individuals whose performance may justify an offer of permanent employment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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11. Employee referrals provide a rich source of good applicants for many small firms. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 12. The source that accounts for most new hires is help-wanted ads in newspapers. a. True b. False ANSWER: False RATIONALE: Employee referrals are responsible for more new hires than any other source. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 13. Executive search firms should be used only by large companies because of their cost. a. True b. False ANSWER: False RATIONALE: At times the need for a manager who can help the firm move to the next level justifies the small company’s use of an executive search firm that can conduct a wide-ranging search for individuals who possess the right combination of talents for the available position. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 14. Headhunters are typically used to locate qualified candidates for positions typically paying a minimum of $100,000 to $250,000 per year. a. True b. False ANSWER: False RATIONALE: The cost of the services may be cost effective when identifying management recruits with more advanced skills. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 15. Because help-wanted advertising tends to be ineffective, most well-managed small businesses reject this method of recruitment. a. True b. False ANSWER: False RATIONALE: Although some have questioned the effectiveness of help-wanted advertising, many wellmanaged organizations recruit in this way. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:26 AM 1/2/2019 9:00 PM

16. The balance of the U.S. workforce is rapidly shifting toward higher proportions of Asian and Hispanic immigrants. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 17. Hiring a more diverse group of workers can help a company maintain good relations with an increasingly heterogeneous customer base. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 18. Hiring illegal or undocumented workers is a minor offense and affects only the worker, not the hiring firm. a. True b. False ANSWER: False RATIONALE: The opposite is true. POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 19. A job specification refers to a listing of the knowledge, skills, abilities, and other characteristics necessary to perform a job. a. True b. False ANSWER: True RATIONALE: A job description refers to an outline, or summary, of the work to be performed. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 20. In small firms, a professional’s versatility and flexibility may be more important than technical competence. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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21. The job specifications list the duties the incumbent is expected to perform. a. True b. False ANSWER: False RATIONALE: The job specifications are the knowledge, skills, abilities, and other characteristics that an individual must have to perform the job. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 22. Job descriptions are used primarily to avoid lawsuits that might result from the Americans with Disabilities Act. a. True b. False ANSWER: False RATIONALE: Job descriptions are used primarily to aid in personnel recruitment. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 23. A person who interviews well should not automatically be hired. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 24. Released employees are much less likely to sue if they feel their former employer provided ample opportunities to improve their performance before being fired and the company was fair throughout the process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 25. Failure to check the background of a new hire can led to a negligent hiring lawsuit. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 26. The practice of using social media to evaluate a potential employee has become more common and provides a nonproblematic solution. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: RATIONALE:

False Most companies outsource this function to one of hundreds of vendors that specialize in performing this service even if they use the Internet for searches. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 27. Requesting a credit report to establish an applicant’s employment eligibility is illegal according to the Fair Credit Reporting Act. a. True b. False ANSWER: False RATIONALE: It is not illegal but companies should require applicants to sign a written consent (detailing how and what the company plan to check) and must notify the candidate in writing that the report has been requested. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 28. The hiring practices at Basecamp support small firms using additional “test drives” even if a prospective employee has passed a reliable and valid test. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 29. Drug screening programs are too expensive to be worthwhile, even in the long run, for small businesses. a. True b. False ANSWER: False RATIONALE: Substance abuse is linked to 65 percent of all on-the-job accidents, and employees who abuse drugs file six times more workers’ compensation claims than those who don’t. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 30. Training should not be necessary for a new employee to perform the duties for which he or she has been hired. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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31. Continual training is necessary to update knowledge and skills in firms of all sizes. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 32. Orientation refers to instructions given during the interview with an applicant. a. True b. False ANSWER: False RATIONALE: Orientation begins with an individual's first two or three days on the job and can be used to help new employees get settled into their new positions. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 33. A small business can facilitate the orientation process by providing an employee handbook, which outlines the company's practices and procedures. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 34. The purpose of Job Instruction Training is to help supervisors eliminate employees who are weak hires. a. True b. False ANSWER: False RATIONALE: Job instruction training is intended to help supervisors become more effective in training employees. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 35. Although research has shown a growth in spending on training, much of the training is not actually applied on the job. a. True b. False ANSWER: True RATIONALE: A recent study found that spending on training by U.S. corporations soared 15 percent to $70 billion in 2014, a trend that includes explosive growth in technology training tools that involve online and mobile platforms. But unfortunately, much of the training provided to employees each year is never actually applied on the job. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:26 AM 1/2/2019 9:00 PM

36. The small firm has a particularly strong need to develop both managerial and professional employees. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 37. Small firms must exceed large firms in wage and salary levels in order to attract well-qualified personnel. a. True b. False ANSWER: False RATIONALE: Small firms must be roughly competitive but need not exceed. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 38. A piecework compensation plan is a type of time-based compensation system. a. True b. False ANSWER: False RATIONALE: A sales commission compensation plan is a type of incentive plan. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 39. Profit sharing serves more directly as a work-related incentive in small companies than in large corporations. a. True b. False ANSWER: True RATIONALE: Profit sharing provides a more direct work incentive in small firms than it does in large firms. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 40. Employee benefits are expensive, amounting to more than 40 percent of payroll expense for many small firms. a. True b. False ANSWER: False RATIONALE: The cost of employee benefits for many firms is equal to 31 percent of salary and wage payments. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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41. ESOPs can motivate employees as well as allow for owners to withdraw from a business without having to sell the firm to outsiders. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 42. Most small businesses now use flexible benefit plans so employees can select the benefits they wish to receive. a. True b. False ANSWER: False RATIONALE: A small but growing number of small businesses use flexible benefits programs. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 43. PEOs typically charge a fee of at least 7 percent of payroll to a small business. a. True b. False ANSWER: False RATIONALE: For a fee of 2 to 6 percent of payroll, a PEO writes paychecks, takes care of payroll taxes, and files reports required by government agencies. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-5 Special Issues in Human Resource Management Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 44. Because PEOs typically cover hundreds or thousands of people, they can afford to offer benefits superior to those provided by the typical small firm. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 45. Unions typically concentrate their primary attention on small companies, where their influence is most needed. a. True b. False ANSWER: False RATIONALE: Unions typically focus their attention on large companies. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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46. By following constructive personnel policies, small firms can improve the relationship between management and a union. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 47. As a firm grows, it experiences pressure to formalize its personnel policies and procedures. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 48. A human resource manager is unnecessary when employees are represented by a union. a. True b. False ANSWER: False RATIONALE: Appointing a human resource manager is necessary when employees are represented by a union. POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 49. One of the largest expense categories for most businesses is a. advertising. b. research and development. c. payroll. d. professional fees. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 50. Michael, a small business owner of a Web-development firm, wishes to persuade a highly qualified applicant to consider a position with his firm, even though the applicant has also had offers from large firms. What should Michael emphasize to the applicant? a. Family atmosphere with only three employees b. Long history of the firm with no takeovers c. More freedom to structure job responsibilities d. Retirement program and other benefits ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM Copyright Cengage Learning. Powered by Cognero.

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51. Tom is experiencing difficulty in recruiting competent technicians for his business. One way to increase the attractiveness of his small business is by using a. flexible work schedules. b. job descriptions. c. performance testing. d. private employment agencies. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 52. Because Cynthia needs to obtain a replacement for Olivia (who is having a baby and will be out for 12 weeks), which of the following would be the expected first choice to locate a replacement? a. Employee referrals b. Help-wanted advertising c. Public employment agencies d. Temporary help agencies ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 53. Which of the following sources of candidates do small business owners say accounts for most of their hires? a. Walk-ins b. Schools c. Internet Copyright Cengage Learning. Powered by Cognero.

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d. Employee referrals ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 54. Jan is ready to franchise her retail clothing store and needs to hire a new manager who has knowledge in the franchising process. Which recruiting source would be best? a. Temporary help agencies b. Leasing companies c. Headhunters d. Employees ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 55. The differences among employees on such dimensions as gender, age, ethnicity, and race is known as a. job specification. b. workforce diversity. c. human resources. d. workforce differences. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 56. The U.S. Department of Labor projects which trend in workforce composition? a. Increased numbers of Hispanic workers b. Decreased average age c. Decreased numbers of Black and Asians workers d. Increased participation of women in the workforce ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 57. The owner of a small automobile garage has been advised to use an application form in evaluating applicants. This form will be most useful in discovering a. arrest records. b. minimal qualifications. c. physical disabilities. d. religious orientation. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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58. Prospective employers can legally select employees based on the applicant’s a. age. b. disabilities. c. education. d. gender. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/3/2019 11:27 AM 59. Which of the following types of interviewing involves asking applicants how they might react to hypothetical situations? a. Behavioral b. Depth c. Stress d. Traditional ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 60. Which of the following questions would be expected from a small business using behavioral interviews? a. How did you learn to write so well? b. Where did you attend school? c. What do you do for fun? d. Tell me about a time when you managed a major project. ANSWER: d Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 61. Karen is checking references and finds former employers reluctant to do more than verify dates of employment even though the applicants have given their consent. A probable reason for their reluctance is that a. records for former employees are typically not readily available. b. the former employee is glad to have the potential employee not employed with their company. c. respondents may fear litigation by former employees who fail to get jobs they seek. d. Karen is asking too many personal questions. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/3/2019 5:23 AM 62. Requesting a password to directly access a potential employee’s Facebook page is a. completely legal. b. illegal in more than half of U.S. states. c. illegal in a few U.S. states. d. legal but not ethical. ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic HRM Bloom’s: Analyze 8/29/2018 11:26 AM 1/2/2019 9:00 PM

63. To be the most useful, a test for a potential applicant should be a. general in nature. b. practical. c. psychological in nature. d. valid and reliable. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 64. Marcia knew the importance of testing candidates before hiring them, but 40 percent of the employees who successfully passed the employment test later performed poorly on the job. Marcia’s employment test lacked a. applicability. b. interpretability. c. reliability. d. validity. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 65. The Americans with Disabilities Act requires employers of at least _____ employees to make _____ adaptations to Copyright Cengage Learning. Powered by Cognero.

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facilitate the employment of individuals protected by the act. a. 50, minimal b. 15, reasonable c. 100, specific d. 10, verifiable ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 66. Preparation of employees for career advancement through education, job experiences, network development, and performance assessment is called a. employee training. b. human resources. c. management development. d. workforce diversity. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 67. New employees benefit most from orientation when it is given a. during the employment review. b. after selection, but prior to reporting for work. c. during the first two or three days on the job. d. during the first year of employment. ANSWER: c POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 68. Planned efforts to help workers master the knowledge, skills, and behaviors they need to perform their duties is known as a. employee training. b. human resources. c. management development. d. workforce diversity. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 69. A systematic step-by-step method for training nonmanagerial employees on the job is known as a. On-the-Job Training. b. Employee Development Training. c. Job Instruction Training. d. Intensive Job Orientation. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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70. Which of the following items plays the central role in attracting and motivating employees? a. Flexible work duties b. Job sharing arrangements c. Compensation d. Vacation benefits ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 71. Amanda is paid $0.45 for every widget she produces. This type of pay plan is a. a cafeteria plan. b. called piecework. c. part of a salary level. d. included in stock incentives. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 72. A compensation system based on time is most appropriate for jobs in which a. performance is not easy to measure. b. responsibilities are difficult to understand. Copyright Cengage Learning. Powered by Cognero.

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c. fringe benefits are an important part of the compensation offered. d. commissions make up a significant portion of compensation received. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 73. Management and other key personnel “get a piece of the action” through a. fringe benefits. b. time-based compensation. c. profit sharing. d. tax benefits. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 74. Profit-sharing plans a. provide a more direct incentive in small firms than in large firms. b. are practically impossible to use successfully in small firms. c. are similar to individual incentive plans in their motivational effect. d. are an expensive fringe benefit for small firms, costing 40 percent of payroll. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 75. Katie owns a catering company where employees work both in preparing the food as well as serving at the events. Which of the following would be the best compensation system? a. Time-based b. Profit-sharing plan c. Piecework rate d. Commission ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 76. Small firms give employees a share of ownership in the business through a. profit plans. b. group incentive plans. c. employee stock ownership plans. d. action-sharing plans. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM Copyright Cengage Learning. Powered by Cognero.

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77. In addition to its usefulness in attracting and holding key personnel, ESOPs can also a. allow employees to veto management decisions. b. give employees a share of liability. c. give owners a way to cash out of the business. d. provide an incentive for managers to reduce labor costs. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 78. Employers will often provide such perks as health insurance and paid vacation time that are designed to be attractive and useful to employees. Collectively these perks are known as a. stock. b. piecework. c. human resources. d. employee benefits. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 79. The cost of employee benefits is approximately _____ the cost of salary and wage payments. a. 5 percent b. 25 percent c. 31 percent d. 66 percent Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 80. As his business grows, George finds he has neither the time nor the skills to manage the human resources function. He has decided to outsource part of personnel management to an organization that handles paperwork and administers benefits for his employees in an arrangement called a. a joint venture. b. a co-employment agreement. c. employment benefits. d. human resourcing. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 81. James is investigating the advantages of employee outsourcing. It appears that the greatest benefit will be to free him and his firm from a. the need for extensive training. b. fringe benefit costs. c. concern about disciplinary action. d. excessive paperwork. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 82. Which of the following acts applies to any employer of 15 or more people and prohibits discrimination on the basis of race, color, religion, sex, or national origin? a. Fair Labor Standards Act b. Civil Rights Act c. Age Discrimination in Employment Act d. Immigration Reform and Control Act ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 83. The Occupational Safety and Health Administration (OSHA) enforces safety and health standards and was established by the a. Americans with Disabilities Act. b. Occupational Safety and Health Act. c. Fair Labor Standards Act. d. Civil Rights Act. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:26 AM 1/2/2019 9:00 PM

84. A small electrical contractor with nine employees learns that the employees would like to join a union. This contractor realizes that the firm a. must follow the bargaining pattern set by large contractors. b. can lawfully refuse to negotiate. c. must negotiate if a majority of employees decide to unionize. d. must deduct union dues from employees' paychecks. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 85. Which condition is most likely to encourage the appointment of a human resource manager? a. Labor turnover rate is low. b. Competition for personnel is low. c. Employees are represented by a union. d. The firm has grown to 35 employees. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 86. The owner of a growing business wonders when to hire a human resource manager. The most likely time would be when a. the labor turnover rate is high. b. total employment exceeds 75. Copyright Cengage Learning. Powered by Cognero.

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c. employees are not unionized. d. morale is high. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 87. Identify and explain the advantages of five “selling points” a small company can use to attract candidates. ANSWER: 1. Entrepreneurial companies allow new managers to work more closely with the CEO, which can lead to quicker action. 2. A small business can provide opportunities for the general, high-level management or professional experience that achievement-oriented hires find attractive. 3. Rather than toiling away in obscure, low-level, specialized positions in a large firm while “paying their dues” and working their way up the corporate ladder, capable newcomers can quickly move into positions of responsibility. 4. Small firms can also structure the work environment to offer professional, managerial, and technical personnel greater job variety and freedom than they would normally have in a larger business. 5. Individual contributions can be recognized rather than hidden under numerous layers of bureaucracy. 6. Compensation packages can be structured to create powerful incentives for outstanding performance. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 88. Explain the strengths and weaknesses for the following sources of employees: (a) walk-ins, (b) schools, (c) public employment offices, (d) private employment agencies, (e) executive search firms, (f) employee referrals, (g) Internet recruiting, (h) help-wanted advertising, and (i) temporary help agencies. ANSWER: a. Walk-ins or unsolicited applicants are sometimes qualified, and the cost of recruiting Copyright Cengage Learning. Powered by Cognero.

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them is zero. There is a selection cost involved in talking with them, but some minimum time must be given as a matter of good public relations. The quality of the applicants will vary. Schools, as a source, have applicants that require extensive training or on-the-job experience, but the employer can obtain necessary basic talent from this source. Students who are interested in the firm’s industry may be better prepared and motivated. Public employment offices provide applicants without cost to the employer. A frequent limitation, of course, is the type of manpower or quality level that is available through this source. The recession has resulted in more highly trained individuals being listed. Private employment agencies are a good source of applicants with specific skills, such as accountants, computer programming, or managers. In some cases, the firm may not even be charged a fee for the service provided by the agency; other cases may result in charges to the company. Executive search firms are effective for filling key positions in the firm, but the cost of these services is high, rendering this option impractical for some small businesses. Other businesses who are trying to move up to the next level may justify the cost of an executive search firm to conduct a wide-ranging search for applicants with the desired skills and talent of the position. Employee referrals produce good-quality applicants if the firm's current employees are well qualified. Current employees typically only recommend personnel whom they know and trust can fill a position. Some small business owners state that this source results in the most hires. Internet recruiting is becoming more popular, owing to the efficiency of this approach in matching qualified applicants with potential employers. Using the Internet for recruiting is convenient, but it can also carry some significant limitations and unanticipated costs. Help-wanted advertising permits businesses to go after the type of personnel they need and to stir up interest on the part of qualified applicants who may not be listed with employment agencies. Effectiveness varies. Temporary help agencies can provide workers to small businesses looking to obtain temporary replacements. These agencies tend to have less specialized trained persons.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 89. Mona has recently been named the CEO of a small production company that she and her parents co-own. She is concerned with the lack of innovation in the company and plans to hire at a minimum 10 more employees in the next three years. Currently 92 percent of the production workforce are white males who have some college education and are Copyright Cengage Learning. Powered by Cognero.

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expected to retire in the next five years. What suggestions would you make to Mona? ANSWER: Mona should direct efforts toward more workforce diversity both in the new hires and when others retire. Finding new employees could be from numerous sources, and she should expect and encourage increased diversity in ethnicity, gender, race, age, and work week arrangements. Having individuals with different social backgrounds would be positive for increased innovation to remain fully competitive. Mona should also be aware that adding 10 more employees requires the company to be in compliance with the Americans with Disabilities Act, which may also require diversity in the company. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-1 Recruiting Personnel QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 90. A band manager is designing an application form for hiring new band members. After discussing information that should and should not be on the form, how will the form’s information be used for the remaining steps of the interview process? ANSWER: The application should ask for the applicant’s name, address, Social Security number, educational history, employment history, and references. It does not need to be lengthy or elaborate and must be carefully written to avoid legal complications. The band manager cannot seek information about gender, race, religion, color, national origin, age, or disabilities. The information requested should be focused on helping the employer make a better jobrelated assessment. Based on the job description and job specification of the band position, the band manager may ask questions that would determine if the prospective employee should be brought in for an interview (possibly with other band members) and testing (plays with the other band members). The form should have the applicants indicate they understand that references (both musical and nonmusical) will be checked and that certain physical examinations will be required (e.g., drug screening). POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM Copyright Cengage Learning. Powered by Cognero.

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91. Describe the five steps involved in selecting employees. ANSWER: Use application forms: An employer can collect enough information to determine whether a prospect meets minimum qualifications for the job. Interview the applicants: The employer can obtain some idea of an applicant’s job knowledge, intelligence, and personality. Check references and other background information: Employers should carefully check former employers, schools, an applicant’s references, and credit scores. The process should include Internet searches as well as possibly outside companies checking information. Test the applicants: Tests that are reliable and valid over skills needed to perform the job can be a better and more useful predictor of fit. Require physical examinations: The applicant should be able to meet the physical demands of the job. Care must be exercised, however, so as not to discriminate against the physically disabled. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 92. Considering the weaknesses of interviewing, how can the procedure be made more effective in selecting employees? ANSWER: A weakness of the interviewing process is that unskilled interviewers may think they are infallible judges of human nature. Interviewers must be careful to avoid questions that conflict with the law. Interviewing can be made more effective by taking the following actions • • • •

Resort more to behavioral interviews. Questions are asked to judge how a person reacts to situations, how they spend their free time, and how they embody core values. Have the applicant interviewed by two or more persons. The expense may be worth the decrease in bias and errors in judgment. Plan questions before the interview. Questions can be eliminated that are in violation of the law. Remember that employment interviewing is a two-way process. The applicant is evaluating the employer as well so encourage them to ask questions to gain a clear idea of what the job will entail.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-2 Evaluating Prospects and Selecting Employees QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.20.02 - LO: 20-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/3/2019 11:31 AM 93. Explain the nature of orientation programs and why they are needed. ANSWER: Orientation programs consist of training given during the first two or three days of employment. They include instruction not only about job duties but also about company policies, procedures, and benefits. They also acquaint the newcomer with personnel and the physical layout of the office or other facilities. New employees are naturally sensitive when they begin a job. Orientation presents a valuable opportunity to help them start off on the right foot. The employer has the employee's attention in an unusual way and can use the orientation to lay the foundation for a long-term commitment and minimize feelings of alienation. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 94. Sierra has hired a front office manager, Todd. What suggestions should Sierra follow to make the implementation of training more effective for Todd? ANSWER: Put it on paper: Sierra should have Todd develop a personal action plan for implementing the training including details on how Todd will apply the concepts, the results he expects, how they will be measured, and when he expects to see them. Sierra should check to see how she can help Todd if Todd indicates he will need assistance to implement the plan. Measure results: By setting measurable goals, Sierra provides a benchmark for her new employee to reference. By having a clear goal, Todd knows how his performance will be assessed. Get peers to help: Sierra should organize a way for new trainees to get together in hopes they will discuss the training concepts. Involve supportive superiors: Sierra and other management should meet with Todd and other new trainees to communicate expectations, promote focus on concepts, provide encouragement, and eliminate obstacles. Provide access to experts: Sierra should provide Todd with reference materials, additional information, and experts as a follow-up to the training in hopes to have it used on the job. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-3 Training and Developing Employees QUESTION TYPE: Essay Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/3/2019 11:33 AM 95. Tim and Tina own an independent pet grooming business in which employees are hired to groom the animals, take care of customer needs, and clean the facility. Other area competitors offer the same services and pay their employees minimum wage. Tim and Tina have decided to pay employees $12.00/hr and include unlimited services for the employee’s animals and allow them to provide grooming for one guest of their choice each month. What could the grooming business gain from this payroll decision? ANSWER: • The grooming business may see an improvement in recruiting and retention, particularly if the positions are difficult to fill. These improvements could lead to higher employee morale and decreased training costs. • The employees may feel more appreciated and the longer hours may be worth the effort due to the higher pay and benefits. • The public image of the grooming business could be improved with customers and the community. The positive word of mouth could draw more people into the business because the customers may think the appreciation of the employees may lead to their pets receiving better care. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: HRM KEYWORDS: Bloom’s: Evaluate DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 96. Discuss the use of compensation and incentives in recruiting employees for small businesses. ANSWER: Except in very unusual situations, small firms must be roughly competitive with larger firms in financial remuneration. If the small firm pays substantially less than competitors, it will have difficulty obtaining comparable talent. To some extent, of course, weaknesses in the area of salaries might be offset by strengths in other areas (e.g., commission systems, bonus and profit-sharing plans, fringe benefits, and employee stock ownership plans). However, employers are viewed as attractive to potential applicants only to the degree that they can offer competitive rates. In the area of nonfinancial incentives, small firms have the potential for superiority. They can offer applicants an escape from bureaucracy and red tape. They may offer applicants the opportunity to perform challenging work, as well as the means to obtain diversified experience quickly. These are meaningful incentives if the firm is strong and growing and knows where it is going. Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-4 Compensation and Incentives for Employees QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.04 - LO: 20-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 97. Identify and discuss the advantages and disadvantages to using a PEO. ANSWER: Co-employment or outsourcing the human resource management aspects of a company involves the use of professional employer organizations (PEO). The law holds both companies responsible for payment of payroll taxes and workers’ compensation insurance and compliance with government regulations. Advantages • •

The PEO will assume the burden of managing payroll and other administrative processes such as overseeing health benefit programs, taking care of payroll taxes, and filing governmental reports. It may allow small employers to provide better benefit packages because a PEO can obtain better rates by pooling employee numbers.

Disadvantages • • •

Fees range from 2 percent to 6 percent of payroll. Small businesses must bear any increased benefit costs if the PEO is used for benefits. Joining a PEO may cause a change in a small company’s governmental compliance because the government will consider the number of employees for the small business to be the larger PEO number.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/3/2019 11:35 AM

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98. Define each of the following statutes and indicate who has to abide by each act: (a) Civil Rights Act, (b) Occupational Safety and Health Act, (c) Fair Labor Standards Act and (d) Family and Medical Leave Act. ANSWER: a) Civil Rights Act prohibits discrimination based on race, color, religion, sex, or national origin. While the act is for small businesses with at least 15 employees, the law is applicable for any business size and impacts all aspects of hiring, firing, promotion, transfer, and compensation. Protection against sexual harassment is also included. This law is the basis for other laws that extends similar protection to the aged and handicapped. b) Occupational Safety and Health Act regulates the safety of workplaces and work practices. This law applies to firms of any size involved in interstate commerce and resulted in the formation of the Occupational Safety and Health Administration (OSHA) to enforce any necessary safety and health standards. c) Fair Labor Standards Act established a minimum wage (which is periodically increased by Congress) and specifies time-and-a-half pay for nonsupervisory employees who work more than 40 hours per week. Employers who have more than one employee and who are involved in interstate commerce are required to abide by the law. d) Family and Medical Leave Act guarantees employees meeting certain conditions will receive unpaid leave for childbirth, adoption, or other family qualified needs. The worker must have been employed by the firm for at least 12 months and have worked at least 1,250 hours over the previous 12 months. The business must continue health care coverage during the leave and guarantee that the employee can return to the same job or one that is comparable. The law applies to firms with at least 50 employees. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 99. Having been in business for five years, Secondhand Treasures specializes in antique home and personal items made before 1960. The company has expanded into 10 locations with 103 employees, due in part to the recession leading to increased business. The company is having trouble maintaining employees for longer than three months, especially for positions requiring extensive knowledge of an item’s value. What conditions in Secondhand Treasures would justify the owner’s decision to hire a human resource manager? ANSWER: Conditions that justify Secondhand Treasures hiring a HR manager would include: There are a substantial number of employees: Currently, the company has 103 employees and with the growth rate, that number is likely to increase. The labor turnover rate is high: The company has a difficult time keeping employees for longer than three months. The need for skilled or professional personnel creates problems in recruitment or selection: Due to the need for a highly skilled appraiser, these positions are difficult to fill. Supervisors or operations employees require considerable training: Again, the need for personnel who are specialized is known. Other issues that support hiring a human resource manager would include: Employee morale is unsatisfactory: While not stated in the case, high turnovers can lead to problems with employee morale. Copyright Cengage Learning. Powered by Cognero.

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Industry competition for personnel is keen: A logical assumption would be having difficulty finding a person with the specialized knowledge may be due to increased competition. Employees are represented by a union: Depending on future need, Secondhand Treasures’ employees might unionize, requiring a human resource manager. POINTS: 1 DIFFICULTY: Hard REFERENCES: 20-5 Special Issues in Human Resource Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: HRM KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/3/2019 11:38 AM Match the term with its definition. Some terms may not be used. a. Cafeteria plan b. Employee training c. Job description d. Job Instruction Training e. Job specification f. On-the-job training g. Reliability h. Validity DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel 20-2 Evaluating Prospects and Selecting Employees 20-3 Training and Developing Employees QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 SMAL.LONG.20.20.02 - LO: 20-2 SMAL.LONG.20.20.03 - LO: 20-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 100. The consistency of a test in measuring job performance ability ANSWER: g POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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101. A systematic, step-by-step method for on-the-job training of nonmanagerial employees ANSWER: d POINTS: 1 102. The extent to which a test assesses true job performance ability ANSWER: h POINTS: 1 103. An outline of the work to be performed for a particular position ANSWER: c POINTS: 1 104. Instruction at the place of employment, supervised by a professional trainer or experienced employee ANSWER: f POINTS: 1 105. Planned efforts to help workers master the knowledge, skills, and behaviors they need to perform their duties ANSWER: b POINTS: 1 106. A list of the knowledge, skills, abilities, and other characteristics needed to perform a specific job ANSWER: e POINTS: 1 Match the term with its definition. Some terms may not be used. a. Behavioral interview b. Co-employment c. Employee benefits d. Flexible benefit programs e. Headhunter f. Management development g. Piecework h. Professional employer organization DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel 20-2 Evaluating Prospects and Selecting Employees 20-3 Training and Developing Employees 20-4 Compensation and Incentives for Employees 20-5 Special Issues in Human Resource Management QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 SMAL.LONG.20.20.02 - LO: 20-2 SMAL.LONG.20.20.03 - LO: 20-3 SMAL.LONG.20.20.04 - LO: 20-4 SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

HRM Bloom’s: Remember 8/29/2018 11:26 AM 1/2/2019 9:00 PM

107. An arrangement to outsource part of personnel management to an organization that handles paperwork and administers benefits for those employees ANSWER: b POINTS: 1 108. A search firm that locates qualified candidates for executive positions ANSWER: e POINTS: 1 109. An approach that assesses the suitability of job candidates based on how they would respond to hypothetical situations ANSWER: a POINTS: 1 110. Benefit programs that allow employees to select the types of benefits they wish to receive ANSWER: d POINTS: 1 111. Financial incentive based on number of units produced ANSWER: g POINTS: 1 112. Supplements to compensation designed to be attractive and useful to employees ANSWER: c POINTS: 1 113. Preparation of employees for career advancement through education, job experiences, network development, and performance assessment ANSWER: f POINTS: 1 Match the term with its definition. Some terms may not be used. a. Civil Rights Act b. Fair Labor Standards Act c. Family and Medical Leave Act d. Human resource management e. Management development f. Occupational Safety and Health Act g. PEO h. Workforce diversity DIFFICULTY: Easy REFERENCES: 20-1 Recruiting Personnel 20-5 Special Issues in Human Resource Management Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.20.01 - LO: 20-1 SMAL.LONG.20.20.05 - LO: 20-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: HRM KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:26 AM DATE MODIFIED: 1/2/2019 9:00 PM 114. Legislation prohibiting discrimination based on race, color, religion, sex, or national origin ANSWER: a POINTS: 1 115. Legislation that regulates the safety of workplaces and work practices ANSWER: f POINTS: 1 116. Legislation that assures employees of unpaid leave for childbirth or other family needs ANSWER: c POINTS: 1 117. A company that sets up co-employment agreements ANSWER: g POINTS: 1 118. Federal law that establishes a minimum wage and provides for overtime pay ANSWER: b POINTS: 1 119. Differences among employees on such dimensions as gender, age, ethnicity, and race ANSWER: h POINTS: 1 120. The management of employees in a way that enables a firm to reach its strategic objectives ANSWER: d POINTS: 1

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Chapter 21 - Managing Small Business Operations 1. Work groups tend to be better at coordination than specialization. a. True b. False ANSWER: False RATIONALE: The opposite is true. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-0 Managing Small Business Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.00 - LO: 21-0 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 2. Operations refers to the processes used to create and deliver a product or service. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-1 Competing with Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 3. Powerful companies, whether large or small, gain power when satisfying customer needs and wants better than their competitors. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-1 Competing with Operations QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 4. In order to achieve market success, a firm merely needs to concentrate on either providing an excellent product or service, or devising an insightful marketing strategy. a. True b. False ANSWER: False RATIONALE: Successful companies have operations that involve all operational activities create value for customers. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-1 Competing with Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 5. Only product firms have an operations process. a. True b. False ANSWER: False RATIONALE: Both service and product firms have an operations process. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-1 Competing with Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM Copyright Cengage Learning. Powered by Cognero.

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6. When Kentucky Chocolates mixes ingredients for its candies, this act is part of operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-1 Competing with Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 7. Because close interactions with customers allow employees to better understand them, management should be sent into the field periodically. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 8. Technology can adequately replace the human interaction when the needs of the customer involve large amounts of data. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 9. Job shops in manufacturing use specialized equipment. a. True b. False ANSWER: False RATIONALE: Job shops in manufacturing use general-purpose equipment. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 10. Companies that prepare income tax returns are a form of job shop. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 11. The terms repetitive manufacturing and mass production are synonymous. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 12. Continuous manufacturing refers to assembly lines that run 24 hours a day, seven days a week. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 13. Flexible manufacturing systems use a combination of repetitive and continuous manufacturing to lower costs while satisfying customer needs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:27 AM 1/2/2019 9:12 PM

14. Manufacturers with seasonal demand schedules often hire temps during peak production and keep only skeleton crews the rest of the year. a. True b. False ANSWER: False RATIONALE: Manufacturers will produce to the average demand, intentorying finished goods until needed. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 15. For service firms, the customer has to arrive before production begins, resulting in employee scheduling issues. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 16. An example of a demand management strategy is a kids-eat-free offering on Tuesdays at a local restaurant. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 17. For a store, the key to maintaining high-quality service is to carry more stock. a. True b. False ANSWER: False RATIONALE: Research shows that the majority (72 percent ) of stores run out of stock from incorrect forecasting, lost or misplaced inventory, poor shelving or storage systems, and inadequate stock measurement. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 18. The ideal quantity of an item for a business to purchase is referred to as the economic order quantity (EOQ). a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM Copyright Cengage Learning. Powered by Cognero.

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19. Obsolescence is a cost of inventory. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 20. The just-in-time inventory system classifies inventory into three categories based on value. a. True b. False ANSWER: False RATIONALE: The just-in-time inventory system is designed to cut inventory carrying costs by making or buying what is needed just as it is needed. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 21. The simplest method of inventory record-keeping is called cycle counting. a. True b. False ANSWER: False RATIONALE: The simplest is the two-bin system. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 22. Quality is best defined as the totality of features and characteristics of a product or service that impacts the firm’s ability to satisfy stated or implied needs. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 23. A genuine concern for customer needs and customer satisfaction can assist the TQM efforts of a small business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 24. Firms that pay attention to operating details are stronger than those that empower their customers for quality improvement. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: False RATIONALE: Firms should do both. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 25. While large corporations have access to data-mining techniques for insights into customer buying patterns, small companies typically cannot afford the software. a. True b. False ANSWER: False RATIONALE: Data-mining techniques can provide powerful insights to guide small business operations and should not be overlooked and is included in most business management software programs. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 26. Kaoru Ishikawa contends that 95 percent of the typical company’s quality problems can be solved by using “The Basic Six” quality tools. a. True b. False ANSWER: False RATIONALE: There are seven quality tools. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 27. The cost of getting quality right is often more than a small business can bear. a. True b. False ANSWER: False RATIONALE: According to Philip Crosby, “Quality is free!” In other words, the savings associated with getting quality right more than offset the cost of a total quality management program. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 28. Poka-yoke is a proactive approach that seeks to mistake-proof a firm’s operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM Copyright Cengage Learning. Powered by Cognero.

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29. With acceptance sampling, having a smaller sample to work with reduces sampling error. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 30. Weighing bags of mulch during a production process is an example of a variable inspection. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 31. Unless a firm is planning to market products in Europe or supply components to U.S. automakers, getting ISO 9000 certification is not recommended. a. True b. False ANSWER: False RATIONALE: ISO 9000 certification is particularly valuable for small firms because they usually lack a global image as producers of high-quality products. Improvements in processes can enable a firm to turnout higher-quality work in less time, which has a positive effect on the bottom line. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 32. Measuring quality in a service business is easier than measuring quality in a production business. All you have to do is ask the customer. a. True b. False ANSWER: False RATIONALE: Gathering relevant and useful measurements can be problematic when assessing the quality of a service. It is easier to measure the length of a section of pipe than the quality of motel accommodations. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 33. The quality of a finished product depends on the quality of the raw materials used to make it. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/2/2019 9:12 PM

34. The importance of purchasing rests on three areas: quality, service, and cost. a. True b. False ANSWER: False RATIONALE: The three areas are quality, delivery, and cost. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 35. Buying components is preferable to making them when it is necessary to protect a secret design for a seasonal item. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 36. Outsourcing noncompetitive functions can free the entrepreneur to focus on his or her greatest strengths. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 37. Cooperative purchasing organizations are firms that specialize in the purchasing function and provide this service to small businesses. a. True b. False ANSWER: False RATIONALE: Cooperatives are composed of several smaller business who combine their demand for products and services with the goal of negotiating as a group for lower prices and better service from suppliers. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 38. The Supply Chain Operations Reference model is a list of five critical factors when assessing a supplier’s performance. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM Copyright Cengage Learning. Powered by Cognero.

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39. Because the small business owner must perform many functions that consume many hours each day, it is acceptable practice to decline a salesperson’s request for an appointment. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 40. An example of associative forecasting is when a concert promoter predicts attendance based on the trend of attendance of the same event in the same location in previous years. a. True b. False ANSWER: False RATIONALE: Associative forecasting takes a variety of driving variables into account when determining expected sales. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 41. It has been determined that using an accounts payable automation service can reduce costs to less than $1 per invoice. a. True b. False ANSWER: True RATIONALE: The actual cost cut is 75%. POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Information Technologies Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 42. The goal of lean production is to use the minimum amount of resources necessary to achieve a total bundle of satisfaction for the customer. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 43. Bottlenecks in a process are responsible for slower throughput times for the entire process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM Copyright Cengage Learning. Powered by Cognero.

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44. When a company expands resources in response to a constraint, they are using the option of increasing efficiency. a. True b. False ANSWER: False RATIONALE: Expanding resources as a solution to a constraint is an example of adding capacity. POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 45. Purchasing and inventory management share the same objective by contributing to profitable operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-3 Inventory Management and Operations 21-5 Purchasing Policies and Practices QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 46. At the weekly managers’ meeting, Marcel is discussing how the company’s product is made and delivered to its customers. Marcel is talking about a. distribution. b. human resources. c. operations. d. planning. ANSWER: c POINTS: 1 DIFFICULTY: Easy Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 21-1 Competing with Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 47. The topic of discussion during the monthly senior managers’ meeting is how best to manufacture the company’s product with existing materials, manpower, and machinery. This discussion is about a. inventory management. b. inventory overhead. c. operations management. d. production management. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-1 Competing with Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 48. Martha knows that to be successful, everything her company does must create customer a. premiums. b. products. c. services. d. value. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-1 Competing with Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

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49. Which operations factor is centered around satisfying customers over time? a. Flexibility b. Facilities and equipment c. Choice of a joint venture d. Customer demand ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-1 Competing with Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 50. Which item is a tangible output for a guest at a bed and breakfast? a. Questions answered about local attractions b. Full breakfast in the morning c. Use of a room d. Camaraderie with fellow guests ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 51. Jasper operates a machine shop. Orders from his customers are small, but his machines can easily be set up to make other items for different customers. This type of manufacturing is known as a. flexible manufacturing. b. a job shop. Copyright Cengage Learning. Powered by Cognero.

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c. project manufacturing. d. repetitive manufacturing. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 52. Job shops are best suited for a. short production runs. b. long production runs. c. special-purpose equipment. d. standardized products. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 53. Linda creates websites for her customers. Each one is designed to meet the specific needs of the customer. This type of manufacturing is called _____ manufacturing. a. continuous b. flexible c. project d. repetitive ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 54. At CPL Manufacturing, the one-millionth product must be identical to the first. The work is automated and accomplished by machines designed expressly to make these products. This type of manufacturing is known as _____ manufacturing. a. continuous b. flexible c. project d. repetitive ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 55. Which of the following aspects is the most descriptive of a product operation as opposed to a service operation? a. Customer interaction b. Created and delivered on demand c. Intangible aspects d. Repetitive operations ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze Copyright Cengage Learning. Powered by Cognero.

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56. Ralph operates a computer-controlled machine. His jobs can be either large or small. To change the setup from one product to another usually requires only a change in programming. This type of manufacturing is known as _____ manufacturing. a. continuous b. flexible c. project d. repetitive ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 57. Repetitive operations in manufacturing use a. general-purpose machines. b. job-order schedules. c. highly specialized equipment. d. short production runs. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 58. Which of the following puts a ceiling on the firm’s ability to meet demand and match competitors and may also determine startup costs? a. Planning Copyright Cengage Learning. Powered by Cognero.

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b. Quality standards c. Capacity d. Working hours ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:40 PM 59. Duff’s Buffet offers a discount for lunches on Tuesdays. Duff’s is using a. capacity planning. b. a demand management strategy. c. project marketing. d. service inputs. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 60. Which of the following is the inventory control method that uses a targeted service level allowing for the variability of supply and demand? a. ABC method b. Economic order quantity c. Just-in-time inventory system d. Statistical inventory control ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-3 Inventory Management and Operations Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 61. The ABC method of inventory management is founded on the notion that a. some inputs are more valuable or critical to a firm’s operations than others. b. inventory costs should be cut to an absolute minimum by reducing inventory on hand. c. a firm should know its economic order quantity at all times. d. the cost of placing an order is a fixed cost. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 62. A category “C” item in the ABC method of inventory management for a college bookstore would be a. pens. b. magazines. c. shirts. d. textbooks. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM Copyright Cengage Learning. Powered by Cognero.

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63. Adoption of the just-in-time inventory system requires a. the elimination of raw materials wherever possible. b. an emphasis on work in progress. c. a reduction in the firm’s finished goods. d. close cooperation with suppliers. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 64. Twice a year a firm's entire production line shuts down and a complete count is taken of every inventory item. This inventory system is called a. cycle counting. b. perpetual inventory. c. physical inventory. d. two-bin inventory. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 65. In March, chassis prep counts its inventory. In June, the cabinet shop does the same thing. In September, appliances counts its inventory. This inventory system is known as a. cycle counting. b. perpetual. c. physical. Copyright Cengage Learning. Powered by Cognero.

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d. two-bin. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 66. In his retail store, Jose’s point-of-sale software relieves inventory for each item purchased. At any time, Jose can look at the inventory records on his computer and know exactly how many of each item are in stock. This type of inventory system is called a. cycle counting. b. perpetual. c. physical. d. two-bin. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 67. Which of the following is an example of "quality"? a. The taste of a restaurant's food b. Turn time at an auto repair shop c. Product fail rate for a manufacturer d. All of these are examples of quality. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 5:24 AM 68. If a small plumbing company is installing a TQM program, management should be aware that a. quality must become a very important goal of the entire business. b. ISO 9000 will be the controlling criterion. c. costs cannot be allowed to limit quality goals. d. acceptance sampling may be necessary. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 69. A small business owner decides that her firm has a good customer focus and adequate tools and techniques needed for a TQM program. To be assured of a strong quality program, she must also have the proper a. benchmarking. b. marketing research. c. organizational culture. d. statistical quality control. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM Copyright Cengage Learning. Powered by Cognero.

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70. Bettina would like to improve the quality of the dining experience in her cafe. To achieve this, Bettina’s efforts should begin with a focus on a. customers. b. employees. c. management. d. operations. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 71. Which of the following of Kaoru Ishikawa’s seven tools is most commonly used to see how often different values in a set of data occur? a. Check sheet b. Histogram c. Control chart d. Pareto chart ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 72. The traditional method of maintaining product quality has been a. a check sheet. b. a control chart. c. inspection. Copyright Cengage Learning. Powered by Cognero.

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d. a histogram. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 73. Rather than rely on the bartender to use the correct proportions of ingredients in mixed drinks, a bar owner installed a drink-mixing machine that automatically selects and measures the ingredients into the glass. This method is a type of a. idiot-proofing. b. poka-yoke. c. Kanban. d. robotics. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:41 PM 74. Bobbi Jo pulls one part from the production line every 15 minutes and measures its dimensions against the specifications. Bobbi Jo is using a. acceptance sampling. b. a control chart. c. statistical process control. d. TQM. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 75. A method that judges products as acceptable or unacceptable is known as a. poka-yoke. b. attribute inspection. c. acceptance sampling. d. variable inspection. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 76. If a small fencing company wants to check the length of fence posts to determine if they are acceptable, a(n) _____ should be used. a. poka-yoke b. attribute inspection c. acceptance sampling d. variable inspection ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM Copyright Cengage Learning. Powered by Cognero.

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77. ISO 9000 a. is more important for large global firms than small firms with domestic markets. b. measures how companies have improved their environmental footprint. c. is challenging to earn but is rewarding from a marketing viewpoint. d. reflects international excellence in quality management standards. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 78. By conforming to ISO 9000, a small manufacturing firm could achieve improvements in a. sales to Walmart. b. export sales. c. product design. d. quality of incoming raw materials. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 79. Service businesses are typically more concerned with _____ costs than with the cost of materials for operations. a. equipment b. fixed asset c. labor d. leasing ANSWER: c Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 80. A reason to buy component parts is a. closer coordination between scheduling and production. b. a secret design may be protected. c. improved plant utilization. d. the parts are a specialty of the supplier. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 81. The buying services from a third party to manage a firm's functions is known as a. asset efficiency. b. diversification of supplies. c. importing. d. outsourcing. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

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82. A suggestion for increasing outsourcing success is a. have a backup plan in case of supplier failure. b. outsource the unique product of the business. c. convey complete trust in the outsourcing firm as a sign of good faith and do not monitor progress. d. negotiate for priority in the production schedule. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:42 PM 83. Raj’s company can either make the components or buy them. He should decide to make the components rather than buy them from a supplier a. when utilization of plant capacity permits more economical production. b. when an outside supplier specializes in the production of that component. c. if in-house operations can concentrate on the firm's specialty—the finished product. d. if the risk of equipment obsolescence can be transferred to the supplier. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:43 PM 84. Cooperative purchasing organizations for small businesses are more successful now because of the a. acceptance of coops as a business model by suppliers. Copyright Cengage Learning. Powered by Cognero.

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b. diversification of numerous global suppliers. c. increased use of the Internet to locate more suppliers. d. use of crowdsourcing to locate new suppliers. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 85. Terrell is trying to decide whether to concentrate his purchases with one supplier or diversify with two or three. One factor in favor of a single supplier is a. insurance against interruptions caused by strikes. b. a particular supplier’s superiority in product quality. c. knowing the customer’s loyalty, the supplier may provide better prices and service. d. locating the best source in terms of price, quality, and service with each purchase. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:44 PM 86. To build a good relationship with a supplier and become more competitive, a small business should a. pay bills at the latest date possible. b. ignore sales representatives until ready to buy. c. browbeat the supplier into special concessions. d. minimize abrupt cancellations of orders, particularly to gain temporary advantages. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 87. Aaron operates a lemonade stand in New York City’s Central Park. His business is seasonal, but within those seasons several other factors influence the demand for lemonade. Aaron is most likely to use _____ to help him predict demand on a daily basis. a. associative forecasting b. linear regression c. historical sales data d. the weather report ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 88. An approach that emphasizes efficiency through elimination of waste independent of other aspects of the process is called a. capacity management. b. lean production. c. synchronous management. d. waste-less production. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Understand 8/29/2018 11:27 AM 1/2/2019 9:12 PM

89. The approach that recognizes the assets and activities of the company are interdependent and should be managed so as to maximize the company’s performance is a. capacity management. b. lean production. c. synchronous management. d. waste-less production. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 90. Myra operates a punch press on a production line. Because she is slower than the operators both before and after her in the process, work stacks up at her press. Myra is a a. bottleneck. b. constraint. c. defect. d. hazard. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:44 PM 91. Which of the following is of greatest concern to a production manager? Copyright Cengage Learning. Powered by Cognero.

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a. A bottleneck b. Capacity waste c. A constraint d. Overproduction ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 92. Which of the following solutions to a constraint would increase efficiency? a. Move maintenance times. b. Inspect quality. c. Subdivide work. d. Expand resources. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 93. Shoichiro Toyoda, former president of Toyota Motors, built on Ford’s concepts and focused on the need to eliminate waste from the production system. He followed a(n) _____ approach. a. assembly line b. distribution c. lean production d. synchronous production ANSWER: c POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 94. Define operations management, and discuss operational factors that will impact a firm’s performance. ANSWER: Operations management is the planning and control of a conversion process that includes turning inputs into outputs that customers desire. Operational factors that will impact a firm’s performance center around five questions that cover aspects of customer satisfaction and how the company compares to its competitors. 1. How much flexibility is required to satisfy your customers over time? 2. What is customer demand today? What is the demand trend for the future? Are existing facilities and equipment adequate to keep up with current and future demand? 3. What options are available for satisfying your customers? Should you set up in-house fabrication, outsource production, or enter a joint venture for manufacturing or service delivery? 4. What operations-related skills or capabilities set a firm apart from its competitors? How can you best take advantage of these distinctive features in the marketplace? 5. Does the competitive environment require certain capabilities that your enterprise lacks? POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-1 Competing with Operations QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 95. Christie and Kevin are starting a produce farm raising organic vegetables. Kevin plans to sell the produce wholesale to a local restaurant, and Christie is going to start a cooking school spotlighting the produce. Complete the following table detailing the inputs and outputs between the product business versus the service business. What are the similarities? Product: Wholesale Restaurant Sales

Operation

Services: Organic Food Cooking School

Input Processes Output ANSWER: Product: Copyright Cengage Learning. Powered by Cognero.

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Wholesale Restaurant Sales Organic Food Cooking School Ground, Plants, Seeds, Labor, Organic Produce, Kitchen Facilities, Input Machinery, Energy, Facilities Labor, Energy, Preparing Lessons Preparing Ground, Planting, Setting Up Produce and Equipment, Watering, Harvesting, Taking Processes Teaching Class, Cleaning Up Product to Restaurant Organic Produce, Satisfied Satisfied Cooking Class Attendee, Output Restaurant Owner Prepared Organic Dishes Both businesses use organic produce, but more importantly, both should have satisfied customers as outputs. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-2 The Operations Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 96. Holly is a business consultant who assists new companies in writing business plans. What type of manufacturing operation would Holly’s business be considered, and what are important characteristics for operational success? ANSWER: Holly’s business is using project manufacturing because she creates unique but similar products, i.e., the business plans. This type of operation has to be highly flexible to meet the requirements of the job and the demands of customers. However, because of the similarity involved, Holly can achieve operational efficiencies by using manufacturing methods. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-2 The Operations Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 97. Discuss the objectives of inventory management. ANSWER: Inventory management is necessary to ensure the continuous operation and therefore should do the following: •

Meet immediate customer demand: Not having enough inventory means customers cannot purchase the product.

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• • • •

Reduce dependence on a supplier: This relates both to not wanting to order as much and not being dependent on the supplier. Avoid stockouts: Not having product on the shelf means customers cannot purchase the products. Take advantage of discounts: These are important to control inventory costs. Protect against price increases of products: Do this to also control costs.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:46 PM 98. Describe the ABC Inventory Classification System, and give examples of each category for a food item common to a restaurant. ANSWER: The ABC system classifies inventory items into three categories based on dollar velocity (purchase price multiplied by annual quantity consumed). The purpose of the ABC system is to focus managerial attention on the most important items. Category A includes the few high-dollar items that account for the largest percentage of total dollars or are otherwise critical in the production process, thereby deserving close control. Items in this category for fine dining restaurant would be the higher priced entrees (steaks, seafood) and any liquor and wine if it is served. Category B items are less costly but deserve moderate managerial attention because they still make up a significant share of the firm’s total investment. Examples would be less expensive entrees (chicken, pasta) and side items such as vegetables. Category C contains low-cost or noncritical items that do not justify close control. Items would be baking ingredients such as flour, salt, and most spices. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM Copyright Cengage Learning. Powered by Cognero.

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99. Describe common inventory record-keeping systems and list guidelines for their use. ANSWER: • A physical inventory system takes an actual count of items by hand on a periodic basis. The result is accurate but time consuming. • A cycle counting inventory system counts different segments of the physical inventory at different times of the year. This method is less complicated than a physical inventory. • A perpetual inventory system provides an ongoing, current record of inventory items. It still requires a physical count periodically to adjust for possible loss or theft. • A two-bin system sets up two containers, each holding enough items to cover lead time. When one is emptied, it is replaced with the second and a new container is ordered. This method is easy to implement and use. Small firms should use a method that is simple because too much control is wasteful and unnecessary. Using a computerized system may simplify things. The small business owner may find a software program that fits the business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-3 Inventory Management and Operations QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.03 - LO: 21-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:47 PM 100. According to the American Society for Quality (ASQ), what features are necessary for TQM? ANSWER: ASQ introduced total quality management as an all-encompassing, quality-focused approach that is characterized by three features. 1. The program is customer driven. The customers’ needs and wants are the core drivers. 2. It emphasizes organizational commitment. Management leads, but the entire organization participates. 3. It focuses on a culture of continuous improvement. The program is much more than a one-off effort. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom’s: Understand 8/29/2018 11:27 AM 1/3/2019 1:49 PM

101. Wally’s Western Wear is a retailer of western style clothing that produces all of its own products. Wally and Wanda, the owners, want to incorporate a system to solve quality problems and understand they need to start with their customers. What suggestions would be helpful for this process? ANSWER: Wally’s Western Wear should consider the following suggestions. •

•

• •

•

To start, they should ask the question: What products and services will satisfy customers’ needs and expectations? For their store, customers will expect a combination of product and service, as opposed to concentrating on one aspect or the other. After they have identified customer expectations, Wally’s Western Wear should identify how to exceed these expectation so as to leave a lasting, favorable impression on customers. The goal is a repeat customer who provides positive word of mouth. The concern for customer needs and satisfaction could then be used to energize the total quality management effort of Wally’s Western Wear especially if employees are treated as well as the customers. Since “Retail is detail,” identifying the operating details (average sales, traffic patterns of customers, which items are the most profitable) critical for success is necessary. For a clothing store where customers have plenty of choices, it is even more important. Customer opinions should be sought as to their satisfaction. Again, employees having direct contact with customers can serve as the eyes and ears of Wally’s Western Wear in evaluating existing quality levels and customer needs. Managers should also be watching and listening for customer reactions. By combining information from the employees and management, the company could work toward involving and empowering customers to improve quality. Company sales data should be “mined” for insights into customer behavior. Fortunately, statistical business management software programs are available with “business intelligence” modules to assist Wally’s Western Wear in this effort.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:52 PM 102. Discuss quality tools and techniques that can be used to improve quality. Specifically describe the difference between inspection vs. poka-yoke as a quality assurance method. How do these methods relate to Ishikawa’s “The Basic Seven” and statistical methods of quality control? ANSWER: Tools, techniques, and procedures needed to ensure high-quality products and services once Copyright Cengage Learning. Powered by Cognero.

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the business is committed to continuous improvement are needed. A combination of methods based on the company’s industry and product can be used to achieve this improvement. • • •

• • •

TQM is an approach that embodies management’s commitment to providing highquality products and services. It emphasizes continuous improvement. Inspections, the traditional method of maintaining quality control, consist of examining a part or product after it has completed a process to determine whether or not it is acceptable. Attribute and variable inspection are variations of this method. The Basic Seven are quality tools (cause-and-effect diagrams, check sheets, control charts, histograms, Pareto charts, scatter diagrams, and flow or run charts) that can solve 95 percent of a company’s quality problems according to its creator, Kaoru Ishikawa. Poka-yoke is a more proactive approach that seeks to mistake-proof a firm’s operations. Potential problems are identified, and hopefully designs are changed before the product is made. Acceptance sampling is a statistical method that involves taking random samples of products and measuring them against predetermined standards. Sampling error as well as the use of attribute or variables should be decided before using this method. ISO 9000 certification, while difficult to achieve, reflects the highest level of quality management. The certification is an international recognition for a company’s efforts.

Ishikawa’s Basic Seven are tools that can be incorporated into any of the techniques. These tools help a firm collect and analyze data relating to quality to determine areas for improvement. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-4 Quality and Operations Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.04 - LO: 21-4 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:53 PM 103. Monique is the operations manager at a small company that imports English leather-goods for resale. In a recent meeting with the CEO, the decision was made that the small company would concentrate purchases with one supplier. What reasons may have prompted this decision to have been made? ANSWER: A small business will typically choose to use only one vendor for four reasons: 1. 2. 3. 4.

A particular supplier may be superior in its product quality. Larger orders may qualify for quantity discounts. Orders may be so small that it is impractical to divide them among several suppliers. The purchasing firm may, as a good customer, qualify for prompt treatment of rush orders and receive management advice, market information, and flexible financial terms in times of crisis.

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Because this company is importing leather-goods that likely have a higher price point, it would be important to have a higher-quality good, which supports the first reason. If this supplier has been used for many years, then the second and last reasons may be significant for the company as well. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:55 PM 104. How can supplier performance be measured when selecting a new supplier? Discuss the SCOR model followed by other suggestions for good relations. ANSWER: It is vitally important to choose suppliers carefully because their failure will cause problems for a small business. When first selecting a supplier, a small business should address the following issues. •

How does the supplier compare to others on measures that are important to the business? The SCOR model centered around the following five attributes can be used for a start.

1. Reliability: Does the supplier provide what the company needs and fill orders accurately? 2. Responsiveness: Does the supplier deliver inputs when they are needed? 3. Flexibility: Does the supplier respond quickly to changes in the company’s order? 4. Cost: Does the supplier help the company control the company’s cost of goods sold, total supply chain management costs, and warranty/returns costs? 5. Asset Efficiency: Does the supplier help the company improve efficiencies by shortening the cash cycle, inventory holding time, and demand on assets? • •

What services does the supplier offer? Do they extend credit, plan promotions, or offer management advice? Maintaining the relationship is important so professional purchasing practices should be used, such as paying bills promptly, listening to sales representatives, minimizing abrupt cancellation of orders, avoiding browbeating, cooperating, and being courteous.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-5 Purchasing Policies and Practices QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.05 - LO: 21-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom’s: Analyze 8/29/2018 11:27 AM 1/3/2019 1:57 PM

105. Discuss principles of lean production, specifically the ways that the Toyota Production System uses to eliminate waste. ANSWER: Shoichiro Toyoda advocated eliminating the following: Defects, because they are costly because they have to be repaired or scrapped. Overproduction, because it must be stored and may never be sold. Transportation costs, because they can be minimized by locating close to suppliers and customers. Waiting, because idle resources are wasteful. Inventory in excess of the minimum required, because it is unproductive and costly. Motion, whether by-product, people, or machinery, because it can be wasteful. Processing that is not productive, because it is wasteful. POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 1:58 PM 106. Deidre owns Dede’s T-shirts, a sports clothing production company that produces embroidered shirts that are monogrammed. She has identified a constraint with her monogramming machine in that the work flow slows considerably due to the shirts not being fed into the machine properly and the machine taking a certain amount of time. How could this problem be addressed? ANSWER: Dede’s T-shirts has three options. Add Capacity: Could another machine be bought (expand resources)? Could the process before the monogramming be split (work be subdivided)? Could Dede’s T-shirts find another company to handle monogramming (outsource production to a company with more capacity)? Increase Efficiency: Could Deidre arrange schedules so that the monogramming machine never stops (resources take no breaks)? Could Deidre keep the monogramming machine running as much as possible (maintenance be scheduled during nonproduction time)? Can Dede’s T-shirts train more employees on monogramming or buy an improved machine (production be increased by employee training, upgraded tools, or automation)? Filter Production: Could shirts be checked so that the machine never jams (quality be inspected prior to the constraint)? Copyright Cengage Learning. Powered by Cognero.

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Can shirts be checked before moving to the monogramming machine (stop points be put in so that work meets goals before being moved)? POINTS: 1 DIFFICULTY: Hard REFERENCES: 21-6 Lean Production and Synchronous Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom’s: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 2:01 PM Match the term with its definition. Some terms may not be used. a. ABC method b. Associative forecasting c. Cooperative purchasing organization d. Cycle counting e. Demand management strategies f. Economic order quantity g. Just-in-time inventory system h. Perpetual inventory system i. Physical inventory system j. Poka-yoke k. Statistical inventory control l. Two-bin inventory system DIFFICULTY: Easy REFERENCES: 21-2 The Operations Process 21-3 Inventory Management and Operations 21-5 Purchasing Policies and Practices QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.02 - LO: 21-2 SMAL.LONG.20.21.03 - LO: 21-3 SMAL.LONG.20.21.05 - LO: 21-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 107. Operational strategies used to stimulate customer demand when it is normally low ANSWER: e Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 108. A system of classifying items in inventory by relative value ANSWER: a POINTS: 1 109. A method of reducing inventory carrying costs by making or buying what is needed just as it is needed ANSWER: g POINTS: 1 110. A method of controlling inventory that uses a targeted service level, allowing statistical determination of the appropriate amount of inventory to carry ANSWER: k POINTS: 1 111. An index that determines the quantity to purchase in order to minimize total inventory costs ANSWER: f POINTS: 1 112. A method for counting different segments of the physical inventory at different times during the year ANSWER: d POINTS: 1 113. A method of inventory control based on the use of two containers for each item in inventory, one to meet current demand and the other to meet future demand ANSWER: l POINTS: 1 114. A method that provides for periodic counting of items in inventory ANSWER: i POINTS: 1 115. Forecasting that considers a variety of variables to determine expected sales ANSWER: b POINTS: 1 116. A method for keeping a running record of inventory ANSWER: h POINTS: 1 117. An organization in which small businesses combine their demand for products or services in order to negotiate as a group with suppliers ANSWER: c POINTS: 1 Match the term with its definition. Some terms may not be used. a. Acceptance sampling b. Attributes c. Bottleneck Copyright Cengage Learning. Powered by Cognero.

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d. Constraint e. Inspection f. ISO 9000 g. Operations h. Operations management i. Poka-yoke j. Quality k. Total quality management l. Variables DIFFICULTY: Easy REFERENCES: 21-1 Competing with Operations 21-4 Quality and Operations Management 21-6 Lean Production and Synchronous Management QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 SMAL.LONG.20.21.04 - LO: 21-4 SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom’s: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/2/2019 9:12 PM 118. The features of a product or service that enable it to satisfy customers’ stated and implied needs ANSWER: j POINTS: 1 119. Any point in the operations process where limited capacity reduces the production capability of an entire chain of activities ANSWER: c POINTS: 1 120. The examination of a part or a product to determine whether it meets quality standards ANSWER: e POINTS: 1 121. The planning and control of a conversion process that includes turning inputs into outputs that customers desire ANSWER: h POINTS: 1 122. A proactive approach to quality management that seeks to mistake-proof a firm’s operations ANSWER: i POINTS: 1 123. The most restrictive limit on capacity, determining the capacity of the entire system ANSWER: d Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 124. The standards governing international certification of a firm’s quality management procedures ANSWER: f POINTS: 1 125. Product or service parameters that can be counted as being present or absent ANSWER: b POINTS: 1 126. Measured parameters that fall on a continuum, such as weight or length ANSWER: l POINTS: 1 127. The use of a random, representative portion of products to determine the acceptability of an entire lot ANSWER: a POINTS: 1 128. An all-encompassing management approach to providing high-quality products or services ANSWER: k POINTS: 1 Match the term with its definition. Some terms may not be used. a. Continuous manufacturing b. Coop c. Flexible manufacturing systems d. Job shops e. Lean production f. Make-or-buy decisions g. Operations h. Outsourcing i. Project manufacturing j. Repetitive manufacturing k. Supply Chain Operations Reference model l. Synchronous manufacturing DIFFICULTY: Easy REFERENCES: 21-1 Competing with Operations 21-2 The Operations Process 21-5 Purchasing Policies and Practices 21-6 Lean Production and Synchronous Management QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.21.01 - LO: 21-1 SMAL.LONG.20.21.02 - LO: 21-2 SMAL.LONG.20.21.05 - LO: 21-5 SMAL.LONG.20.21.06 - LO: 21-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom’s: Remember 8/29/2018 11:27 AM 1/3/2019 2:02 PM

129. An approach that recognizes the interdependence of assets and activities and manages them to optimize the entire firm’s performance ANSWER: l POINTS: 1 130. A form of manufacturing with output that more closely resembles a product stream than individual products ANSWER: a POINTS: 1 131. An approach that emphasizes efficiency through elimination of waste ANSWER: e POINTS: 1 132. Manufacturing operations that usually involve computer-controlled equipment that can turn out products in smaller or more flexible quantities ANSWER: c POINTS: 1 133. Manufacturing operations used to create unique but similar products ANSWER: i POINTS: 1 134. Manufacturing operations designed for short production runs of small quantities of items ANSWER: d POINTS: 1 135. Manufacturing operations designed for long production runs of high-volume, standardized products ANSWER: j POINTS: 1 136. Contracting with a third party to take on and manage one or more of a firm’s functions ANSWER: h POINTS: 1 137. A choice that companies must make when they have the option of making or buying component parts for products they produce ANSWER: f POINTS: 1 138. The processes used to create and deliver a product or service ANSWER: g POINTS: 1 139. A list of critical factors that provides a helpful starting place when assessing a supplier’s performance Copyright Cengage Learning. Powered by Cognero.

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ANSWER: k POINTS: 1

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Chapter 22 - Managing the Firm's Assets 1. Working capital management focuses on the attractiveness of long-run investment opportunities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 2. A firm's working capital cycle refers to the flow of cash to purchase and sell fixed assets. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 3. Management should be working continuously to shorten the working capital cycle. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 4. The cash conversion period is the time period between ordering inventory and receiving cash for its sale. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 5. During the cash conversion period, the firm has the benefit of supplier financing. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 6. The longer the cash conversion period, the greater the potential for cash flow problems to exist for a firm. a. True b. False ANSWER: True POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 7. In a healthy business, cash inflows and outflows are typically even. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 8. Monitoring cash flows is at the core of working capital management. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Copyright Cengage Learning. Powered by Cognero.

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9. A firm's net cash flow may be determined by examining its bank account. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 10. Revenue is recorded at the time a sale is made, but cash receipts are recorded when money actually flows into the firm. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 11. Calculating cash flows requires that a small business owner be able to distinguish between sales revenue and cash receipts and between expenses and disbursements. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 12. Depreciation is a cash outflow. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 13. Accounts receivable are sometimes called near cash because they can be converted to cash whenever a business needs to do so. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 14. Batching invoices holds up the receipt of customers' money and its deposit in the bank. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 15. The average collection period is the number of days that a firm extends credit to its customers. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 16. Day sales outstanding is computed by dividing a firm's accounts payable by daily credit sales. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Copyright Cengage Learning. Powered by Cognero.

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17. When dealing with large corporations, small companies are especially vulnerable to problems caused by slow collections. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 18. Factoring account receivables involves the business selling its accounts receivable to a finance company, and the finance company assumes the bad-debt risk associated with the receivables it buys. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 19. The disadvantage of accounts receivable financing is the negative impact on cash flow. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: True / False HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 20. Inventory is a concern only for manufacturing companies. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 21. The last step in managing inventory is to discover how long inventory has been at the company. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 22. For most small businesses, a yearly inventory for accounting purposes is adequate for proper inventory control. a. True b. False ANSWER: False Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 23. Days in inventory is equal to the number of days a firm waits to be paid for inventory that has been sold. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 24. Small business managers tend to overbuy inventory due to not understanding inventory management. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Copyright Cengage Learning. Powered by Cognero.

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25. Improperly managed and uncontrolled stockpiling may greatly increase inventory carrying costs and place a heavy drain on the funds of a small business. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-4 Managing Inventory QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 26. Inventory management and accounts payable management are intertwined. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 27. In managing accounts payable, the principle of "Buy now, pay later" allows a small business owner to delay payment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 28. Terms of 2/10, net 30 offer a 2% potential discount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 29. The percentage annual interest rate is the rate a business will pay by not taking a discount. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 30. Given the terms of 3/10, net 30, a company should pay accounts payable on day 30 if funds are available. a. True b. False ANSWER: False POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 31. The cash conversion period equals the days in inventory plus the days sales outstanding minus days in payables. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-6 Cash Conversion Period Revisited QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.06 - LO: 22-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 32. By buying on credit, a small business is using creditors' funds to supply long-term cash needs. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Copyright Cengage Learning. Powered by Cognero.

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33. The cash conversion period is the time span required to convert paid-for inventory and accounts receivables into cash. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-6 Cash Conversion Period Revisited QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.06 - LO: 22-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 34. The goal of the cash conversion period is to have as few days as possible in the process so as to be able to finance other activities with working capital. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-6 Cash Conversion Period Revisited QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.06 - LO: 22-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 35. The management of a small firm's long-term assets is called capital budgeting. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom's: Remember 8/29/2018 11:27 AM 1/4/2019 10:10 AM

36. Capital budgeting primarily involves short-term decisions on the part of management. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 37. Carrie's decision to research a new product for her children's party business is considered an example of a capital budgeting decision. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 38. Capital budgeting analysis helps managers make decisions about inventory investments. a. True b. False ANSWER: False POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 39. A shortcoming of the accounting return on investment technique is that it is based on actual cash flows received rather than accounting profits. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 40. Accounting profits are identical to actual cash flows. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Copyright Cengage Learning. Powered by Cognero.

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41. An advantage of the accounting return on investment technique is that it ignores the time value of money. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 42. Use of the accounting return on investment technique answers the question, "How long will it take to recover the original investment outlay?" a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 43. The payback period technique measures how long it will take to recover the initial cash outlay of an investment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 44. The payback period technique does not consider the time value of money. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 45. Discounted cash flow (DCF) techniques take into consideration the fact that cash received today is more valuable than cash received one year from now. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 46. Discounted cash flow (DCF) techniques can generally be trusted to provide a more reliable basis for decisions than can the accounting return on investment technique or the payback period technique. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:42 AM 47. The internal rate of return (IRR) method estimates the rate of return that can be expected from a contemplated investment. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:42 AM 48. Small business owners' limited use of discounted cash flow (DCF) techniques has more to do with the nature of the small business itself than with their unwillingness to learn. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-8 Capital Budgeting Practices in Small Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.08 - LO: 22-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Understand 8/29/2018 11:27 AM 1/4/2019 11:42 AM

49. A firm will have difficulty attracting investors if an investment outlay has an internal rate of return below the firm's cost of capital. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 50. In the past, many small business owners relied on quantitative analysis in making capital budgeting decisions. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-8 Capital Budgeting Practices in Small Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.08 - LO: 22-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 51. Survival often becomes the top priority when the undercapitalization and liquidity problems of a small business directly affect the decision-making process. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 22-8 Capital Budgeting Practices in Small Firms QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.08 - LO: 22-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 52. Working capital management a. deals with assigning cash values to employees. b. is not important to small businesses. c. involves managing current assets and short-term sources of financing. d. involves managing long-term assets and liabilities. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 53. Pearl has been asked by her boss to manage the company's working capital. This means Pearl is now in charge of a. cash, fixed assets, and inventory. b. cash, accounts receivable, inventory, and accounts payable. c. cash, accounts receivable, and fixed assets. d. accounts receivable, accounts payable, and long-term investments. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Apply Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:27 AM 1/4/2019 10:10 AM

54. The first step in the working capital cycle process is to a. order inventory. b. purchase or produce inventory for sale. c. receive inventory. d. sell the inventory for cash or credit. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 55. In step 3 of the working capital cycle, a. accounts payable are paid. b. accounts receivable are collected. c. inventory is sold on credit. d. cash is increased. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 56. The cash conversion period is the time between _____ and _____. a. cash payment for inventory; collection of accounts receivable b. placement of an order; cash payment for it c. receipt of inventory; cash payment for it d. sale of inventory; cash collection of accounts receivable Copyright Cengage Learning. Powered by Cognero.

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ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 57. During the cash conversion period, the firm a. increases its cash flow by paying accounts payable. b. no longer has the benefit of accounts receivable. c. sells its long-term assets. d. no longer has the benefit of accounts payable. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 58. Lester is watching the bank balance decline throughout the month and hopes his company won't run out of money before it runs out of month. Lester is concerned about the net cash flow, which is the a. difference between cash inflows and outflows. b. difference between revenues and expenses. c. same as net profit. d. same as working capital plus inventory. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 59. Monthly cash deposits less checks written during the same period equal a firm's a. net cash flow. b. net profit. c. net working capital. d. operating profit. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 60. Cash flows and profits are a. opposites. b. different. c. identical. d. identical after adjustment for depreciation. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 61. Margaret has just sold merchandise to a small beauty salon and has given the salon 45 days to pay the invoice. She is Copyright Cengage Learning. Powered by Cognero.

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at the beginning of the a. life cycle of accounts receivable. b. cash conversion period. c. working capital cycle. d. inventory management cycle. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 62. The number of days, on average, that a firm extends credit to its customers is called a. the cash conversion period b. days in inventory. c. days sales outstanding. d. the cash flow cycle. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 63. Accounts receivable financing a. allows small businesses to extend credit to customers. b. delays the time a company receives money from receivables. c. means borrowing money against the firm's accounts receivable. d. is not a suggested practice due to the cost. ANSWER: c POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 64. Which of the following is a benefit of accounts receivable financing? a. The volume of borrowing can be quickly expanded proportionally in order to match a firm's growth in sales and accounts receivable. b. It is a low cost way of financing. c. Pledging receivables may increase a firm's ability to borrow from a bank. d. It considers the time value of money. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 65. Lucinda has decided to use a _____ to speed up the processing of invoice payments. a. customer box b. deposit box c. lock box d. mailbox ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Apply 8/29/2018 11:27 AM 1/4/2019 10:10 AM

66. Accounts receivable typically are collected and become cash within _____ following a sale. a. 30 days b. 30 to 60 days c. 60 to 90 days d. six months ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 67. Inventory is a "necessary evil" in a financial management system. It is an "evil" because a. it ties up funds that are not actively productive. b. supply and demand cannot be managed to coincide precisely with day-to-day operations. c. it reduces cash when it is sold. d. it deteriorates; therefore, a certain percent is lost to spoilage and waste. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 68. Madeleine would like to know the number of days, on average, that her company carries inventory. Madeleine is interested in the a. days in credit. b. days in inventory. Copyright Cengage Learning. Powered by Cognero.

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c. days in payables. d. average collection period. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-4 Managing Inventory QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 69. Nadine would like to improve the management of inventory in her company. One of her first activities should be to a. discount current items. b. discover how long items have been in inventory. c. organize current items by skew number. d. purchase new items. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 70. If two companies have the same amount of sales, why could one company still have more inventory than the other company? a. The company with the larger inventory sells its inventory faster. b. They are using different inventory systems. c. The company with the larger inventory takes longer to sell its inventory. d. The company with the smaller inventory uses better discounts. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 71. Which of the following is a reason why small business managers tend to overbuy inventory? a. They forecast greater demand than is realistic. b. Vendors insist that prices may be going down. c. They don't want to disappoint vendors and suppliers. d. Maximizing inventory is a good way to decrease taxes. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-4 Managing Inventory QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 72. Accounts payable _____ cash available for the firm when payment is made. a. increase the amount of b. reduce the amount of c. have no effect on the d. represent all of the ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Copyright Cengage Learning. Powered by Cognero.

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73. Nicholas would like to improve the management of his company's accounts payable. One metric he might find useful is a. days in credit. b. days in inventory. c. days in payables. d. the average collection period. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 74. A company with accounts payable of $35,000 and cost of goods sold of $300,000 would have days in payables of _____ days. a. 24 b. 32 c. 43 d. 27 ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 75. The terms 2/10, net 45 offer a _____% discount on purchases paid for within _____ days. a. 2; 45 b. 10; 2 c. 2; 10 d. 10; 45 Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 76. Assuming that cash is available, payment for an account payable with terms of 3/10, net 30 should be made on day a. 3. b. 10. c. 13. d. 30. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 77. Owen was surprised when he calculated the percentage annual interest rate on his accounts payable. He discovered that failure to take advantage of the discount offered by suppliers a. makes a small difference because a business does not pay a high interest rate. b. makes a large difference because a business pays a high interest rate. c. has no effect on cash flows. d. will have erratic effects on rates for the use of a supplier's money. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 78. A company has 30 days in payables, 15 days in inventory, and 20 days sales outstanding. How many days are in the company's cash conversion period? a. 5 b. 25 c. 45 d. 65 ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-6 Cash Conversion Period Revisited QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.06 - LO: 22-6 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 79. Which of the following is NOT a technique for making capital budgeting decisions? a. Accounting return on investment b. Internal rate of return c. Quantitative forecasting d. Payback period ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Copyright Cengage Learning. Powered by Cognero.

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80. Long-term assets are the focus of a. cash budgeting. b. capital budgeting. c. corporate planning. d. investment planning. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 81. The main purpose of capital budgeting is to help managers make decisions about a. discounts to offer to customers. b. long-term investments. c. nonfinancial constraints on expansion. d. short-term investments. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 82. Which of the following would be a capital budgeting decision that a small firm might need to make? a. Replacing delivery trucks with newer models b. Issuing new stock c. Negotiating a new supplier contract d. Computing quarterly labor costs ANSWER: a POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 83. "How many dollars in average profits are generated per dollar of average investment?" is answered using which of the following capital budgeting techniques? a. Accounting return on investment b. Net present value (NPV) c. Internal rate of return (IRR) d. Investment outlay valuation ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:43 AM 84. "How long will it take to recover the original investment outlay?" is answered using which of the following capital budgeting techniques? a. Accounting ratio analysis b. Discounted cash flows c. Net present value (NPV) d. Payback period ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Remember 8/29/2018 11:27 AM 1/4/2019 10:10 AM

85. Discounted cash flow (DCF) techniques answer which of the following questions? a. Do the cash returns of the investment exceed the cash outlays? b. How does the present value of future benefits from the investment compare to the investment outlay? c. How long will it take to recover the original investment outlay? d. How many dollars in average profits are generated per dollar of average investment? ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 86. Which of the following estimates the current value of the cash that will flow into a firm from a project in the future and deducts the amount of the initial outlay? a. Analysis of long-term investment b. Net present value (NPV) c. Internal rate of return (IRR) d. The accounting return on investment technique ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 87. The _____ is calculated by dividing the average annual after-tax profits per year by the average book value of the investment. Copyright Cengage Learning. Powered by Cognero.

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a. payback period b. average investment outlay c. average investment capability d. accounting return on investment ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 88. The payback period and accounting return on investment techniques a. recognize the economic life of a project. b. ignore the time value of money. c. consider only the return for the first year of the investment. d. are more difficult to use than the net present value (NPV) method. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 89. _____ take(s) into consideration the fact that cash received today is more valuable than cash received one year from now. a. The payback period technique b. Discounted cash flow (DCF) techniques c. The accounting return on investment technique d. The investment outlay valuation technique ANSWER: b POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 90. Under the net present value (NPV) method, the rate of return required to satisfy the firm’s investors is the a. opportunity cost. b. internal rate of return. c. cost of capital. d. accounting return on investment. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 91. If the net present value of a proposed investment is positive, a. the firm should not make the investment because the initial outlay of the investment exceeds the present value of the cash flows discounted at the rate of return required to satisfy the firm's investors. b. the investment does not earn the rate of return required to satisfy the firm's investors. c. the present value of future cash flows would be unaffected by the proposed investment. d. the firm should make the investment because the present value of future cash flows discounted at the rate of return required to satisfy the firm's investors exceeds the initial outlay of the investment. ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Analyze 8/29/2018 11:27 AM 1/4/2019 10:10 AM

92. Which of the following statements about capital budgeting practices in small firms is true? a. A large number of owners rely on discounted cash flow (DCF) techniques. b. Small business owners are not very sophisticated about using theoretically sound financial methods. c. In the past, most small business owners relied on the internal rate of return (IRR) method to make capital budgeting decisions. d. Most small business owners today are unwilling to learn how to use discounted cash flow (DCF) tools. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-8 Capital Budgeting Practices in Small Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.08 - LO: 22-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 93. Which of the following is a reason that a small firm would NOT use a discounted cash flow (DCF) technique in evaluating capital investments? a. Company management has a preference for another quantitative method. b. Liquidity is less of an issue for a small company. c. Financial management talent within a small firm is a scarce resource. d. Small firms invest more in short-term assets than large companies. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 22-8 Capital Budgeting Practices in Small Firms QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.08 - LO: 22-8 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:44 AM 94. Discuss the importance of working capital management and how it relates to the working capital cycle of a small Copyright Cengage Learning. Powered by Cognero.

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business. ANSWER:

Working capital management—managing current assets and short-term sources of financing (current liabilities)—is extremely important to most small companies. In fact, no financial management process is more important. Good business opportunities can be irreparably damaged by ineffective management of current assets and short-term liabilities. A firm's working capital cycle is the flow of resources through the company's accounts as part of its day-to-day operations. The steps in a firm's working capital cycle are as follows: • • • • •

Step 1: Purchase or produce inventory for sale, which increases inventory on hand and (a) decreases cash if cash is used to pay for the inventory or (b) increases accounts payable if the inventory is purchased on credit. Step 2: (a) Sell the inventory for cash, which increases cash, or (b) sell the inventory on credit, which increases accounts receivable. Step 3: (a) Pay the accounts payable, which decreases accounts payable and decreases cash. (b) Pay operating expenses and taxes, which decreases cash. Step 4. Collect the accounts receivable when due, which decreases accounts receivable and increases cash. Step 5. Begin the cycle again.

Depending on the industry, the working capital cycle may be long or short. Whatever the industry, however, management should be working continuously to shorten the cycle. POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-1 The Working Capital Cycle QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 95. What are cash flows? What must a small business owner know in order to calculate cash flows? ANSWER: A firm's cash flows consist of cash flowing into a business (through sales revenue, borrowing, etc.) and cash flowing out of the business (through purchases, operating expenses, etc.). Calculating cash flows requires that a small business owner distinguish between sales revenue and cash receipts and between expenses and disbursements. POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-2 Managing Cash Flows QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.02 - LO: 22-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom's: Understand 8/29/2018 11:27 AM 1/4/2019 11:44 AM

96. List some credit management practices that can have a positive effect on a firm's cash flows. ANSWER: The following credit management practices can have a positive effect on a firm's cash flows: • • • • • •

Minimize the time between shipping, invoicing, and sending notices on billings. Review previous credit experiences to determine impediments to cash flows, such as the continued extension of credit to slow-paying or delinquent customers. Provide incentives for prompt payment by granting cash discounts or charging interest on delinquent accounts. Age accounts receivable on a monthly or even a weekly basis in order to identify any delinquent accounts as quickly as possible. Use the most effective methods for collecting overdue accounts. For example, prompt phone calls to customers with overdue accounts can improve collections considerably. Use a lock box—a post office box for receiving remittances. If the firm's bank maintains the lock box to which customers send their payments, it can immediately deposit any checks received into the company's account.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 97. Discuss the types of accounts receivable financing. What are the advantages and disadvantages of using accounts receivable financing? ANSWER: Some small businesses speed up the cash flow from accounts receivable by borrowing against them. By financing receivables, these firms can often secure the use of their money 30 to 60 days earlier than would be possible otherwise. Two types of accounts receivable financing are available. The first type uses a firm's pledged accounts receivable as collateral for a loan. Payments received from customers are forwarded to the lending institution to pay off the loan. In the second type of financing, a business sells its accounts receivable to a finance company, a practice known as factoring. The finance company thereby assumes the bad-debt risk associated with the receivables it buys. The obvious advantage of accounts receivable financing is the immediate cash flow it provides for firms that have limited working capital. As a secondary benefit, the volume of borrowing can be quickly expanded proportionally in order to match a firm's growth in sales Copyright Cengage Learning. Powered by Cognero.

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and accounts receivable. A drawback to this type of financing is its high cost. Rates typically run several points above the prime interest rate, and factors charge a fee to compensate them for their credit investigation activities and for the risk that customers may default in payment. Another weakness of accounts receivable financing is that pledging receivables may limit a firm's ability to borrow from a bank by removing a prime asset from its available collateral. POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-3 Managing Accounts Receivable QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 98. Dana produces fine chocolates for her retail shop, which is open six days a week. The sales are $156,000 annually, with a cost of goods sold of 45% of sales and inventory of 5%. Calculate the days in inventory, and indicate any concerns for the shop considering the national average is 15 days. ANSWER:

Dana is carrying inventory for 26 days more than her competitors. Considering her inventory is highly perishable, the days in inventory is a concern. The possibility of stale products is also a concern. POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-4 Managing Inventory QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 99. Ralph has always enjoyed fireworks and has set up a booth from June 4 through July 4. Additional inventory is scheduled to be sent throughout the month. Ralph is now wondering if he has ordered too much. List three reasons that could have motivated Ralph in his inventory buying. ANSWER: Ralph likes fireworks, so his enthusiasm for the product may have led him to have unrealistic Copyright Cengage Learning. Powered by Cognero.

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forecasts about the demand for fireworks. He may also not want to disappoint customers, which has led him to have more items than necessary. Finally, a wholesaler's promotion or appeal of price increases or wanting to guarantee Ralph has enough stock throughout the month may have influenced him to buy more than was necessary. POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-4 Managing Inventory QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.04 - LO: 22-4 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 100. Calculate the annual interest rate associated with each of the following terms: a. 2/5, net 30 b. 2/10, net 20 c. 3/15, net 30 ANSWER: a.

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POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:45 AM 101. What are key issues in managing accounts payable? ANSWER: The management of accounts payable is based on negotiation and timing, remembering that a small business owner would want to delay payment as long as possible, without damaging the firm's reputation by failing to live up to its agreements. Negotiation may be necessary for emergency situations where a small business may ask creditors to postpone payment on its payable obligations. Because it is in the best interest of the creditor, this solution may be best for both parties. Timing is concerned with when the bill is paid. The days in payables calculation can help a business to see the aging of accounts, as with accounts receivable and inventory. If terms are offered by the creditor (typically 3/10, net 30), the issue is paying the account on day 10 (to receive the discount) or day 30 (to use the seller's money for a longer period). As long as the firm has sufficient funds and the payment will not cause a cash shortage, paying on day 10 is always best because paying on day 30 results in a percentage annual interest rate of 56.4% for the 3/10, net 30 terms. POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-5 Managing Accounts Payable QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:46 AM 102. Jane has started a gift basket company that specializes in regional products. Several corporations use her baskets for the holidays, to welcome new employees, and for their sales staff to use as gifts for corporate clients. Because she noticed her average collection period from last quarter to this quarter had doubled to 60 days, she then realized the company's days in inventory has increased from 30 to 40 days and the days in payables dropped from 35 to 30 days. After calculating Copyright Cengage Learning. Powered by Cognero.

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each quarter's cash conversion periods, what do the changes indicate? ANSWER: Previous Quarter

This Quarter

Because time is money, she should look at why the individual "days" have increased or decreased. • • •

Because the average collection period has increased significantly, she should determine what can be done for the company to be paid sooner. The days in payables has also decreased slightly and should be determined if other arrangements can be made with the company's vendors. Finally, the days in inventory has also increased and should be determined if products are not as popular (and therefore should not be carried as an option).

POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-6 Cash Conversion Period Revisited QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.06 - LO: 22-6 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 103. Define capital budgeting, and provide examples of the types of capital budgeting decisions that a small business owner would make. ANSWER: Capital budgeting is the management of a small firm's long-term assets—equipment and plant. Some capital budgeting decisions that might be made by a small firm include the following: • • • • • POINTS:

Developing a new product that shows promise but requires additional study and improvement. Replacing a firm's delivery trucks with newer models. Expanding sales activity into a new territory. Constructing a new building. Hiring additional salespersons to intensify selling in the existing market.

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DIFFICULTY: Hard REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Apply | Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:47 AM 104. List and briefly describe three techniques for making capital budgeting decisions. Which technique is the most reliable for decision making in capital budgeting analysis? ANSWER: Capital budgeting techniques include: 1. Accounting return on investment technique. The accounting return on investment technique compares the average after-tax profits a firm expects to receive to the average book value of the investment. This technique has two significant shortcomings: (1) It is based on accounting profits rather than actual cash flows received, and (2) it ignores the time value of money. 2. Payback period technique. The payback period technique measures how long it will take to recover the initial cash outlay of an investment. This technique also has two major weaknesses: (1) It ignores the time value of money, and (2) it doesn't consider cash flows received after the payback period. 3. Discounted cash flow (DCF) techniques. The DCF techniques—net present value method and internal rate of return—compare the present value of future cash flows with the investment outlay. DCF techniques provide the best basis for decision making in capital budgeting analysis. POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:47 AM 105. Assume that the cost of certain equipment that a business is considering purchasing is $100,000. The equipment will be depreciated over five years, at which point the salvage value is expected to be $8,000. Anticipated after-tax profits (losses) are as follows: Year 1

After-Tax Profits/Losses $(10,000)

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2 3 4 5

20,000 25,000 35,000 20,000

Compute the accounting return on the proposed investment. ANSWER:

POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:58 AM 106. Compare the two investment proposals below, using the payback period technique. The projected cost of each investment proposal is $100,000. Year 1 2 3 4 5 ANSWER:

Project A (Cash Flow) $25,000 20,000 10,000 10,000 —

Project B (Cash Flow) $25,000 20,000 40,000 30,000 10,000

Capital budgeting is used to compare alternatives so that the best investment decisions can be made. The total cash flow of Project A is only $65,000 from an investment cost of $100,000. The investment is unwise because the initial outlay will never be recovered. Project B is expected to generate $125,000 over its lifetime from an investment of $100,000, and the initial investment will be recovered in less than four years. Project B is the clear winner between the two alternatives.

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POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-7 Capital Budgeting Techniques QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 11:51 AM 107. Many small business owners do not use discounted cash flow (DCF) techniques. What are the reasons why they do not? ANSWER: Several important reasons might explain the limited use of DCF techniques, including the following: •

•

For many owners of small firms, the business is an extension of their lives—that is, business events affect them personally. The same is true in reverse: What happens to the owner personally affects his or her decisions about the firm. The firm and its owner are inseparable. Consequently, nonfinancial variables may play a significant role in an owner's decisions. Survival often becomes the top priority when the undercapitalization and liquidity problems of a small business directly affect the decision-making process. Long-term planning, therefore, is not viewed by the owner as a high priority in the total scheme of things. The greater uncertainty of cash flows within small firms makes long-term forecasting and planning seem unappealing and even a waste of time. The owner simply has no confidence in his or her ability to predict cash flows beyond two or three years, so calculating the cash flows for the entire life of a project is viewed as a futile effort. The value of a closely held firm is less easily observed than that of a publicly traded firm, whose securities are actively traded in the marketplace. Therefore, the owner of a small firm may consider the market-value rule of maximizing net present values irrelevant. Estimating the cost of capital is also much more difficult for a small company than for a large firm. The limited size of a small firm's projects may make net present value computations less feasible in a practical sense. The time and expense required to analyze a capital investment are generally the same whether the project is large or small, so it is relatively costlier for a small firm to conduct such a study. Financial management talent within a small firm is a scarce resource. The ownermanager frequently has a technical background, as opposed to a business or finance orientation, and his or her perspective is influenced greatly by that background.

POINTS: 1 DIFFICULTY: Hard REFERENCES: 22-8 Capital Budgeting Practices in Small Firms QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.22.08 - LO: 22-8 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM Match the term with its definition. a. accounting return on investment technique b. capital budgeting analysis c. discounted cash flow (DCF) techniques d. internal rate of return (IRR) e. net present value (NPV) f. payback period technique g. pledged accounts receivable DIFFICULTY: Easy REFERENCES: 22-3 Managing Accounts Receivable 22-7 Capital Budgeting Techniques QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.03 - LO: 22-3 SMAL.LONG.20.22.07 - LO: 22-7 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 108. An analytical method that helps managers make decisions about long-term investments ANSWER: b POINTS: 1 109. A capital budgeting technique that compares expected average annual after-tax profits to the average book value of an investment ANSWER: a POINTS: 1 110. The present value of expected future cash flows less the initial investment outlay ANSWER: e POINTS: 1 111. A capital budgeting technique that measures the amount of time it will take to recover the initial cash outlay of an investment ANSWER: f POINTS: 1 112. The rate of return a firm expects to earn on a project Copyright Cengage Learning. Powered by Cognero.

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ANSWER: d POINTS: 1 113. Capital budgeting techniques that compare the present value of future cash flow with the cost of the initial investment ANSWER: c POINTS: 1 Match the term with its definition. a. cash conversion period b. days in inventory c. days in payables d. days sales outstanding (average collection period) e. lock box f. working capital cycle g. working capital management DIFFICULTY: Easy REFERENCES: 22-1 The Working Capital Cycle 22-3 Managing Accounts Receivable 22-4 Managing Inventory 22-5 Managing Accounts Payable QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.22.01 - LO: 22-1 SMAL.LONG.20.22.03 - LO: 22-3 SMAL.LONG.20.22.04 - LO: 22-4 SMAL.LONG.20.22.05 - LO: 22-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 10:10 AM 114. A post office box for receiving remittances from customers ANSWER: e POINTS: 1 115. The number of days, on average, that a company holds inventory ANSWER: b POINTS: 1 116. The management of current assets and current liabilities ANSWER: g POINTS: 1 117. The number of days, on average, that a firm extends credit to its customers ANSWER: d Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 118. The time required to convert paid-for inventory and accounts receivable into cash ANSWER: a POINTS: 1 119. The number of days, on average, that a business takes to pay its accounts payable ANSWER: c POINTS: 1

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Chapter 23 - Managing Risk 1. Risk is the "possibility of suffering harm or pain." a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 2. Market risk is uncertainty associated with a situation where only loss or no loss can occur. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 3. Market risk is the possibility of losses associated with the assets and earnings potential of a firm. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 4. The nature of business risk can be observed from two perspectives: asset risk and pure risk. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 5. Only pure risk is insurable. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 6. Real property risks include damage to buildings. a. True b. False ANSWER: True POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 7. A lease on a real property structure will relieve the lessee of being responsible for any damage or loss to the leased premises. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 8. Actual cash value (ACV) refers to the depreciated value of a property. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM Copyright Cengage Learning. Powered by Cognero.

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9. Wrongful acts or omissions for which an injured party can take legal action against the wrongdoer for monetary damages are called statutory liability. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 10. The idea behind an indemnification clause is to shift the responsibility to the party with the most control over the risk exposure. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 11. A consulting firm that typically does not have clients visit its business location would have minimal premises liability exposure. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:11 AM 12. Because the small business owner needs to rely heavily on an insurance agent for advice, risk management and insurance management are synonymous. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-3 Risk Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 13. Loss prevention is choosing not to engage in hazardous activities. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-3 Risk Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:12 AM 14. Crisis planning is a form of risk transfer. a. True Copyright Cengage Learning. Powered by Cognero.

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b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-3 Risk Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 15. Risk financing focuses on making funds available for losses that cannot be eliminated by risk control. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-3 Risk Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 16. Self-insurance requires designating part of a firm's insurance proceeds to provide life insurance on key employees. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-3 Risk Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:27 AM 1/3/2019 7:59 AM

17. Self-insurance simply means having no insurance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-3 Risk Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 18. Risk retention entails financing all or part of a loss from a company's cash flows. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-3 Risk Management QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 19. An insurance agent should provide information in designing an insurance plan; the small business owner will only need to determine the price the company can afford. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: True / False Copyright Cengage Learning. Powered by Cognero.

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HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 20. Securing insurance coverage for all major potential losses would involve making certain that insurance covers the full replacement value of the firm's real and personal property. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 21. A preferred provider organization (PPO) is less expensive than that of health maintenance organization (HMO) and is more limiting in choices of medical care providers. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:13 AM 22. Claims that arise from employee lawsuits alleging wrongful terminations, sexual harassment, or discrimination in the workplace range from $50,000 to $150,000, with annual insurance premiums ranging from $12,500 to $17,500. Copyright Cengage Learning. Powered by Cognero.

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a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 23. A property insurance policy is used by a business owner to insure buildings and personal property owned, but not leased, by the business. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 24. When purchasing property insurance, a business owner can use the named-peril approach, which provides the broadest protection available. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom's: Understand 8/29/2018 11:27 AM 1/3/2019 7:59 AM

25. Property insurance that covers all direct damage to property except damage caused by perils specifically excluded is called commercial general liability (CGL) insurance. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 26. Business interruption insurance provides coverage for loss of income following the interruption of business operations. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 27. Small businesses are particularly vulnerable to employee fraud because of weak financial controls. a. True b. False ANSWER: True Copyright Cengage Learning. Powered by Cognero.

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POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 28. Funds transfer fraud provides coverage primarily against employee dishonesty. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 29. One risk that small businesses normally cover is loss due to the disability of a partner or other key employees of the company. a. True b. False ANSWER: False POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/3/2019 7:59 AM

30. Risk is a. a chance all entrepreneurs take. b. a probability that adverse conditions will result. c. the possibility of suffering harm or loss. d. usually avoidable. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 31. Patrick has a great idea for a new business venture. Even after conducting research, he is not certain whether he can make a go of it. Patrick is concerned about _____ risk. a. credit b. pure c. business d. market ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 32. Brenda expects there will be uncertainty regarding the outcome of her business decisions. The final result of those decisions will not be known until she has identified the investment opportunity, developed strategies, and _____ to her business. a. secured financing b. purchased inventory Copyright Cengage Learning. Powered by Cognero.

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c. committed resources d. performed market research ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 33. Pure risk is a. a chance all entrepreneurs take. b. a condition in which there is a possibility that an adverse deviation from a desired outcome will occur. c. a probability that adverse conditions will result. d. the uncertainty associated with a situation where only loss or no loss can occur. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 34. Morton is discussing with his insurance agent the possibility that he might lose his building and equipment in the event of a fire or windstorm. Should that happen, Morton's company would not be able to earn revenues. These two people are discussing _____ risk. a. disaster b. pure c. business d. market ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-1 What Is Business Risk? Copyright Cengage Learning. Powered by Cognero.

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QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 35. Perry's business is not in the safest neighborhood. He is concerned about robbery and vandalism, two types of _____ risk. a. business b. market c. pure d. uninsurable ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 36. As a rule, only _____ risk is insurable. a. business b. market c. pure d. credit ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember Copyright Cengage Learning. Powered by Cognero.

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DATE CREATED: DATE MODIFIED:

8/29/2018 11:27 AM 1/3/2019 7:59 AM

37. The pure risks that any business faces can be categorized as a. property, liability, and physical. b. property, liability, and personnel. c. market, property, and personnel. d. property, liability, and market. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:14 AM 38. Which of the following terms describes land and anything physically attached to the land, such as buildings? a. Real property b. Personal property c. Replacement value of property d. Actual cash value ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 39. _____ is the cost to replace personal property and rebuild real property at today's prices. a. Property loss b. A peril c. The replacement value of property d. The actual cash value (ACV) Copyright Cengage Learning. Powered by Cognero.

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ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 40. Quentin is getting quotes for insurance on his building. His agent recommends he purchase enough to cover the _____ value, even though this amount is more than Quentin paid for it. a. replacement b. actual cash c. conisurance d. minimum ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 41. Damage to a building by flooding is an example of a a. benign neglect loss. b. direct loss. c. tort-based liability claim. d. depreciated cash value loss. ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 42. The striking dock workers on the West Coast refused to unload the ships carrying merchandise for retail stores. These stores suffered loss of revenue during the Christmas season, their highest earnings period of the year. This revenue reduction is a(n) _____ loss that _____ be covered by insurance. a. direct; can b. indirect; can c. direct; cannot d. indirect; cannot ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 43. Richard must carry workers' compensation insurance to fulfill his _____ liability obligation. a. professional b. tort c. contractual d. statutory ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM Copyright Cengage Learning. Powered by Cognero.

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44. A contractual clause that requires one party to assume the financial consequences of another party's legal liabilities is called a(n) a. worker’s compensation clause. b. extra clause. c. indemnification clause. d. tort. ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 45. Philip leases retail space in a building owned by Roger. The lease agreement contains a(n) _____ clause excusing Roger from responsibility for any financial consequences of Philip's actions. a. premises liability b. indemnification c. operations liability d. Lessor’s release of action ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 46. A “prudent person” is also known as a. a tort. b. the reasonable standard. c. indemnification. d. a personnel risk. Copyright Cengage Learning. Powered by Cognero.

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ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 47. Assume a contract exists between Mr. Jones, a college professor, and his student, Mr. Smith. Jones provides a syllabus, instruction, tutoring, and assessments of learning, but Smith fails the class. Which of the following elements is absent in this case? a. Existence of a legal duty between the parties b. Failure to provide the appropriate standard of care c. Presence of injury or damages d. Evidence that the negligent act is the proximate cause of the loss ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 48. Compensatory damages include _____ damages. a. economic b. breach c. tort d. punitive ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 49. A delivery truck owned by Martin's Lumber backed into a car owned by Bonnie. Bonnie asked Martin's Lumber to pay for the repairs to her car. Bonnie is asking for _____ damages. a. exemplary b. noneconomic c. compensatory d. punitive ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 50. Pain and suffering, mental anguish, and loss of physical abilities are included in which type of damages in a tort case? a. Noneconomic b. Compensatory c. Economic d. Punitive ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM Copyright Cengage Learning. Powered by Cognero.

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51. A small business customer slips on a wet floor (due to a slow water leak), falls, and breaks an arm. Damages that could potentially be awarded to the customer might include a. economic because the customer has a loss of physical abilities. b. noneconomic because the customer has medical bills. c. punitive due to the leak. d. compensatory to cover the cost of repairing the leak. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 52. A carton of eggs broke onto the floor in the dairy section at a grocery store, making the floor slippery. Little Johnny slipped, fell, and hit his head on the floor, causing a cut and mild concussion. The grocery store incurs _____ liability for his injuries. a. premises b. operations c. professional d. product ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 53. For a person to be found guilty of a negligent act, the negligent act must be the _____ cause of the loss in a tort liability claim. a. assumed b. compensatory c. proximate Copyright Cengage Learning. Powered by Cognero.

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d. statutory ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 54. A defect resulting from failure to convey to the user that hazards are associated with a product or to provide adequate instructions on safe product use is known as a(n) _____ defect a. marketing b. manufacturing c. design d. engineering ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 55. Which type of risk directly affects the employee but indirectly impacts the business? a. Liability b. Personnel c. Property d. Pure ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 56. A discrimination lawsuit against an employer by a prior employee is an example of _____ tort liability. a. completed operations b. operations c. premises d. employment practices ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 57. All of the following would be considered a personnel risk EXCEPT a. poor health. b. insufficient retirement income. c. premature death. d. employee theft. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM Copyright Cengage Learning. Powered by Cognero.

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58. Which of the following actions is part of the second step of a risk management program? a. Identify and understand risks. b. Evaluate the potential severity of risks. c. Select methods to manage risks. d. Implement the decision. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-3 Risk Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 59. Review and evaluation is an important step in the risk management process because a. conditions change and mistakes may be identified. b. it is nearly impossible to evaluate risk effectively. c. of the challenges in identifying small business risks. d. it is difficult to select effective methods. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-3 Risk Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 60. Requiring all servers in a restaurant to know how to properly lift heavy objects is an example of loss a. avoidance. b. control. c. prevention. d. reduction. ANSWER: c POINTS: 1 DIFFICULTY: Moderate Copyright Cengage Learning. Powered by Cognero.

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REFERENCES: 23-3 Risk Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 61. Because he is afraid of being in a car accident, Harold never drives. Instead, he always takes the bus or subway. Harold is practicing loss a. avoidance. b. control. c. prevention. d. reduction. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-3 Risk Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 62. Self-insurance requires a. purchasing a high-deductible policy. b. implementing risk control methods. c. owning stock in an insurance company. d. earmarking earnings for a contingency fund against possible future losses. ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-3 Risk Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management Copyright Cengage Learning. Powered by Cognero.

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KEYWORDS: DATE CREATED: DATE MODIFIED:

Bloom's: Understand 8/29/2018 11:27 AM 1/3/2019 7:59 AM

63. Whether a potential loss is "small" or "large" depends on the a. size of the insurance deductible. b. strength of a company's financial position. c. dependability of a company's cash flows. d. level of risk retention the company can handle. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 64. Which of the following is one of the basic principles that should be followed in evaluating an insurance program? a. Consider the feasibility and affordability of insuring smaller potential losses. b. Secure insurance coverage for all major potential losses. c. Consider the various insurance policies that may be appropriate for your business. d. All of these are correct. ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 65. Typically, insurance premiums to cover employee lawsuits alleging wrongful termination start at a. $2,500. b. $7,500. c. $15,000. Copyright Cengage Learning. Powered by Cognero.

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d. $500. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 66. Concern about the replacement value is considered in which principle of a sound insurance program? a. Identify business risks that can be insured. b. Secure insurance coverage for all major potential losses. c. Consider the feasibility and affordability of insuring smaller potential losses. d. Review and evaluate. ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 67. When considering the feasibility and affordability of insuring small potential losses, which company program will impact this decision? a. Actual cash value (ACV) b. FICA c. Self-insurance d. Workers’ compensation ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 68. Identifying in an insurance policy the specific perils covered is a(n) _____ approach. a. no-risk b. named-peril c. coinsurance d. all-risk ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 69. Crime insurance is most critical for a small business when the a. business has weak financial controls. b. firm is struggling. c. owner has a personal distraction. d. owner employs family members. ANSWER: a POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM Copyright Cengage Learning. Powered by Cognero.

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70. A coinsurance clause requires a business owner to insure the company's building and personal property for at least _____ percent of what it would cost to replace the building and the personal property. a. 60 b. 70 c. 80 d. 90 ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 71. Doug's property insurance on his fishing guide business excludes property losses due to the wakes of other fishing boats. This example illustrates the _____ approach to property insurance. a. foreseen risk b. insurance-to-value c. all-risk d. named-peril ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 72. Assume that the physical property of a business is valued at $50,000. The company's commercial property policy contains a coinsurance clause with a stated percentage of 80 percent. The company insures the property for $30,000 (75 percent of the specified minimum). The company incurs a fire loss of $20,000. How much of the loss will the insurance company pay for? a. $0 b. $15,000 c. $20,000 Copyright Cengage Learning. Powered by Cognero.

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d. $10,000 ANSWER: b POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 73. Business interruption insurance is a. required as part of a property insurance policy. b. may be part of an umbrella liability policy. c. not recognized as important by many small business owners. d. part of a commercial general liability (CGL) insurance policy. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 74. Business interruption insurance covers a. debts to suppliers. b. shoplifting. c. lost income. d. defective products. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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77. Which of the following benefits is NOT covered by workers' compensation insurance? a. Wages for a replacement employee b. Rehabilitation expenses c. Death benefits for employees' family d. Loss of wages ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 78. A policy to protect businesses against the broad range of loss exposures arising from their use of the Internet and their holding of confidential information is called a _____ policy. a. social media liability b. cyber liability c. employment practices d. business owner’s ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 79. Which of the following statements about health insurance is true? a. Group health insurance policies typically do not cover outpatient services and preventive care. b. A health maintenance organization (HMO) is generally more expensive than a preferred provider organization (PPO). c. Employees with health insurance typically must pay a co-pay for office visits to the doctor and for prescriptions drugs. d. With a health maintenance organization (HMO), employees must stay with a network of providers or face Copyright Cengage Learning. Powered by Cognero.

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higher out-of-pocket expenses in the event of a claim. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Analyze DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 80. A managed-care network providing health insurance that is more expensive than that of a health maintenance organization (HMO) but offers a broader choice of medical providers is called a a. key-person organization. b. package policy. c. personal maintenance organization. d. preferred provider organization (PPO). ANSWER: d POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:15 AM 81. Disability buyout insurance a. is common in small firms that are single-owner operations. b. protects the firm from losses due to the death of a key employee. c. provides money to buy out a partner. d. replaces revenue lost when a key employee is disabled. ANSWER: c POINTS: 1 DIFFICULTY: Moderate REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 82. Discuss the differences between business risk, market risk, and pure risk. ANSWER: • Business risk. Business risk is the possibility of losses associated with the assets and earnings potential of a firm. Assets include not only inventory and equipment, but also such factors as a firm's employees, its customers, and its reputation. • Market risk. Market risk is the uncertainty associated with an investment decision. An entrepreneur who invests in a new business hopes for a gain but realizes that the eventual outcome may be a loss. Only after identifying the investment opportunity, developing strategies, and committing resources will she or he learn the result. • Pure risk. Pure risk describes a situation where only loss or no loss can occur. As a rule, only pure risk is insurable. That is, insurance is not intended to protect investors from market risks, where the chances of both gain and loss exist. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 83. Jackie owns a building in a downtown area. Her building is used for office space and is rented to a current business tenant. What kind of risk is associated with this property? Is this type of risk insurable? ANSWER: Jackie has market risk and pure risk with her building. The market risk is that the building location will lose value, leading to the loss of potential tenants. If the current tenant decides to not lease the building, Jackie's income could be removed. Pure risk is the physical loss of the building due to weather, fire, or other disaster that could destroy the building. Only pure risk is insurable. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-1 What Is Business Risk? QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Apply 8/29/2018 11:27 AM 1/3/2019 7:59 AM

84. Identify and briefly describe the three types of pure risk. ANSWER: Pure risks that any business faces fall into three groups: 1. Property risks. Property risks involve potential damage to or loss of real property (e.g., land and buildings) and personal property (e.g., equipment). 2. Liability risks. Liability risks arise from statutory liability, contractual liability, or tort liability. 3. Personnel risks. Personnel risks, such as premature death, poor health, and insufficient retirement income, directly affect individuals but may indirectly impact the business as well. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 85. Doug works security at a bar and was recently hurt by a patron who was being forcibly removed from the premises. He believes he has been wrongfully treated by the bar. What four elements must be in place for Doug to make a claim that the bar has been negligent? ANSWER: Four elements must be present for the bar to be found guilty of a negligent act: 1. Existence of a legal duty between the parties. Doug must be able to prove that he was employed by the bar and was provided the opportunity to earn his pay. 2. Failure to provide the appropriate standard of care. Doug must prove that the bar failed to provide standards for him as an employee that other restaurants in the same industry would provide. 3. Presence of injury or damages. Doug must show physical or nonphysical injuries such as financial or psychological burden due to his employment. 4. Evidence that the negligent act is the proximate cause of the loss. Doug must be able to prove that the bar's negligence caused his injuries from the previous claim. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-2 Basic Types of Pure Risk QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Legal Responsibilities KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 86. List and discuss the steps of the risk management process. ANSWER: Five steps are required to develop and implement a typical risk management program. Step 1: Identify and understand risks. To reduce the chance of overlooking important risks, a business should adopt a systematic approach to identifying risks. Useful identification methods include insurance policy checklists, questionnaires and careful analysis of a firm's operations, customers, and facilities. Step 2: Evaluate the potential severity of risks. Once the various risks have been identified, they must be evaluated in terms of the potential size of each loss and the probability that it will occur. At a minimum, risks should be classified into three groups: critical (losses that could result in bankruptcy), extremely important (losses that would require investment of additional capital to continue operations), and moderately important (losses that could be covered with current income or existing assets). Step 3: Select methods to manage risks. The two approaches used in dealing with risk are risk control and risk financing. Risk control involves minimizing loss through prevention, avoidance, and/or reduction of risk. Risk financing focuses on making funds available for losses that cannot be eliminated by risk control. It involves transferring the risk or retaining the risk. Step 4: Implement the decision. Once the decision has been made to use a particular technique or techniques to manage a firm's risks, this decision must be followed by action, such as purchasing insurance and setting aside dedicated funds to cope with any risks that have been retained. Step 5: Review and evaluate. Review and evaluation of the chosen risk management technique are essential because conditions change—new risks arise, and old ones disappear. Also, reviewing earlier decisions to use a specific method may identify previously made mistakes. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-3 Risk Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 87. Beth has started an elder care service. Employees work with people who are not ready to leave their home but have some disability that prevents them from being fully mobile. What should Beth consider in managing the associated risk? ANSWER: The company should identify ways for risk control such as loss prevention, loss avoidance, and loss reduction. It should then examine risk financing—specifically risk transfer and risk retention methods. Copyright Cengage Learning. Powered by Cognero.

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The nature of this business has risks with the client being inadvertently hurt by an employee, as well as the employee being hurt by working with the client or due to a situation at the client's home. Loss prevention methods might include all employees being trained in proper lifting, which might also assist in loss reduction. Loss avoidance is not possible because the potential for employees or clients being hurt is high. Beth will definitely want to transfer some risk with liability insurance and possibly an indemnification clause if the employee was hurt at the client's home. Risk retention might be a possibility by having a higher deductible. Because the business has just begun, it is probably not large enough to have selfinsurance. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-3 Risk Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.03 - LO: 23-3 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 88. List the basic principles in evaluating an insurance program. ANSWER: Three basic principles should be followed in evaluating an insurance program: 1. Consider the various insurance policies that may be appropriate for your business. "Bread-and-butter" type policies that are needed by almost all small businesses include property insurance for buildings and personal property, commercial general liability insurance, automobile insurance, workers' compensation insurance, and crime insurance. At the same time, other insurance policies will likely be needed, depending on the particular industry. 2. Secure insurance coverage for all major potential losses. Small businesses must avoid incurring major uninsured losses that have the capacity to threaten the very existence of the business. For this reason, a business owner should make certain that insurance covers the full replacement value of the firm's buildings and personal property. 3. Consider the feasibility and affordability of insuring smaller potential losses. Smaller potential losses do not pose the same threat as major potential losses do, so an owner will need to weigh the feasibility and affordability of absorbing those smaller losses. Of course, what determines whether a potential loss is "small" or "large" varies, depending on the strength of a company's financial position. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-4 Basic Principles of a Sound Insurance Program QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.04 - LO: 23-4 Copyright Cengage Learning. Powered by Cognero.

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NATIONAL STANDARDS: TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Operations Management Bloom's: Understand 8/29/2018 11:27 AM 1/4/2019 9:16 AM

89. Julie owns a clothing boutique in her hometown. She would like to expand her operations, so she is planning to launch an online store where customers from all over the world can browse her boutique's inventory and make purchases online. As Julie's friend, you have recommended that she purchase a cyber liability insurance policy. Explain to Julie why such a policy would benefit her. ANSWER: Cyber liability policies protect businesses against the broad range of loss exposures arising from their use of the Internet and their holding of confidential information. Coverage may include the following: • •

•

Protection against lawsuits arising from the loss or unauthorized disclosure of confidential data that are in the care and custody of a business. The costs incurred by a business following a network security breach. These costs include computer forensic expenses to determine the extent of the breach, notification costs to affected individuals, credit monitoring costs, and crisis management and public relation costs. The costs incurred by a business following a ransomware attack (also known as cyber extortion). These costs include the expenses of expert IT personnel to evaluate the situation and the payment of a ransom in the event a hacker threatens to damage the business's software management system or release confidential data.

Since Julie's site would include customers' personal information, such as addresses, phone numbers, and credit and/or debit card numbers, Julie would definitely benefit from purchasing this type of insurance policy. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking United States - BUSPROG: Technology TOPICS: Information Technology Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:17 AM 90. Dan bought a $500,000 marina two years ago and obtained $400,000 of property insurance. Recently, economic improvements on the lake have raised the property's value to $550,000 (the good news). But the general store had a fire causing $100,000 worth of damage (the bad news). How much will the insurance company pay to repair the store since Dan has a coinsurance clause with a stated percentage of 80 percent in the marina's policy? ANSWER: Under the coinsurance clause, Dan agreed to maintain insurance equal to 80 percent of the value of the property at the time of actual loss. When the marina was first purchased, Dan Copyright Cengage Learning. Powered by Cognero.

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had enough insurance ($500,000 × 80% = $400,000). With the increase in the property's value, 80% of the new value would be $440,000, resulting in Dan becoming a co-insurer of the property. Because the actual insurance is only about 91% of what it should be, Dan will be required to make up a difference in the store claim. The insurance company would pay $90,909, and Dan would be required to pay the difference of $9,091. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:18 AM 91. Discuss the value of business interruption insurance to a small business. Why do you think many owners fail to appreciate the importance of this coverage? ANSWER: Business interruption insurance provides coverage for loss of income following the interruption of business operations. It helps a business to continue paying for ongoing expenses, such as payroll expenses. This coverage also provides reimbursement for income that would have been earned by the business had no damage occurred. In addition, business interruption insurance may cover "extra expenses" incurred following an insured loss. For example, following major fire damage to a building, an owner may have to secure a temporary location elsewhere in order to continue business operations and avoid losing customers. Students' answers will vary regarding why many owners fail to appreciate the importance of this coverage. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Understand DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 92. Bob and Tom are partners in a business. Discuss the types of insurance the business should carry if something should happen to one of the partners. ANSWER: The business should carry key-person life insurance. By carrying key-person life insurance, a small business can protect itself against the death of key personnel. It is purchased by a firm, with the firm as the sole beneficiary. Most small business advisers suggest term insurance for Copyright Cengage Learning. Powered by Cognero.

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key-person life insurance policies, primarily because of lower premiums. Bob and Tom should also purchase disability insurance. The most common type of disability insurance provides for the payment of a portion (typically two-thirds) of the disabled person's normal monthly income for a period of time after the disability occurs. However, it protects only the disabled person and not the business. Alternatively, Bob and Tom can purchase disability buyout insurance. This type of disability insurance protects both partners by guaranteeing that the healthy partner will have enough cash to buy out the disabled partner without draining capital from the business. POINTS: 1 DIFFICULTY: Hard REFERENCES: 23-5 Common Types of Business Insurance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Reflective Thinking TOPICS: Operations Management KEYWORDS: Bloom's: Apply DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:19 AM Match the term with its definition. a. actual cash value (ACV) b. commercial general liability (CGL) insurance c. direct loss d. disability buyout insurance e. disability insurance f. indirect loss g. loss avoidance h. loss prevention i. loss reduction j. replacement value of property DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk 23-3 Risk Management 23-5 Common Types of Business Insurance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 SMAL.LONG.20.23.03 - LO: 23-3 SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM Copyright Cengage Learning. Powered by Cognero.

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DATE MODIFIED:

1/4/2019 9:20 AM

93. A loss in which physical damage to property reduces its value to the property owner ANSWER: c POINTS: 1 94. Lessening the frequency, severity, or unpredictability of potential losses ANSWER: i POINTS: 1 95. A loss arising from an inability to carry on normal operations due to a direct loss of property ANSWER: f POINTS: 1 96. An insurance term that refers to the depreciated value of property ANSWER: a POINTS: 1 97. Keeping a loss from happening ANSWER: h POINTS: 1 98. Coverage for general liability loss exposure, including premises liability, operations liability, product liability, and completed operations liability ANSWER: b POINTS: 1 99. Choosing not to engage in hazardous activities ANSWER: g POINTS: 1 100. The cost of replacing personal property and rebuilding real property at today's prices ANSWER: j POINTS: 1 101. Coverage that guarantees a healthy partner enough cash to buy out a partner who becomes disabled ANSWER: d POINTS: 1 Match the term with its definition. a. all-risk approach b. business risk c. compensatory damages d. Economic damages e. health maintenance organization (HMO) f. market risk g. named-peril approach h. peril Copyright Cengage Learning. Powered by Cognero.

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i. preferred provider organization (PPO) j. pure risk DIFFICULTY: Easy REFERENCES: 23-1 What Is Business Risk? 23-2 Basic Types of Pure Risk 23-5 Common Types of Business Insurance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.01 - LO: 23-1 SMAL.LONG.20.23.02 - LO: 23-2 SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/3/2019 7:59 AM 102. A managed-care network providing health insurance that is less expensive than that of a HMO but more limiting in choices of medical care providers ANSWER: e POINTS: 1 103. A cause of loss, either through natural events or through the actions of people ANSWER: h POINTS: 1 104. The possibility of losses associated with the assets and earnings potential of a firm ANSWER: b POINTS: 1 105. Identifying the specific perils covered in a property insurance policy ANSWER: g POINTS: 1 106. The uncertainty associated with a situation where only loss or no loss can occur ANSWER: j POINTS: 1 107. Economic or noneconomic damages intended to make the claimant whole by compensating the claimant for any injuries or loss arising from the negligent action ANSWER: c POINTS: 1 108. The uncertainty associated with an investment decision ANSWER: f POINTS: 1 109. Stating in a property insurance policy that all direct damages are covered except those caused by perils specifically Copyright Cengage Learning. Powered by Cognero.

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excluded ANSWER: a POINTS: 1 110. Compensatory damages that relate to economic loss, such as medical expenses and loss of income ANSWER: d POINTS: 1 Match the term with its definition. a. personal property b. proximate cause c. real property d. risk control e. risk financing f. risk management g. risk retention h. risk transfer i. self-insurance j. torts DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk 23-3 Risk Management 23-5 Common Types of Business Insurance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 SMAL.LONG.20.23.03 - LO: 23-3 SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:22 AM 111. Any property other than real property, including machinery, equipment, inventory, and vehicles ANSWER: a POINTS: 1 112. Designating part of a firm’s earnings as a cushion against future losses ANSWER: i POINTS: 1 113. Ways of coping with risk that are designed to preserve the assets and earning power of a firm ANSWER: f POINTS: 1 114. Making funds available to cover losses that cannot be eliminated by risk control Copyright Cengage Learning. Powered by Cognero.

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ANSWER: e POINTS: 1 115. Buying insurance or making contractual arrangements that transfer risk to others ANSWER: h POINTS: 1 116. Financing loss intentionally, through a firm's cash flows ANSWER: g POINTS: 1 117. Land and anything physically attached to the land, such as buildings ANSWER: c POINTS: 1 118. Minimizing potential losses by preventing, avoiding, and/or reducing risk ANSWER: d POINTS: 1 Match the term with its definition. a. business interruption insurance b. funds transfer fraud c. indemnification clause d. key-person life insurance e. personnel risks f. reasonable (prudent person) standard g. torts h. workers' compensation insurance i. workers' compensation legislation DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk 23-5 Common Types of Business Insurance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic TOPICS: Operations Management KEYWORDS: Bloom's: Remember DATE CREATED: 8/29/2018 11:27 AM DATE MODIFIED: 1/4/2019 9:23 AM 119. Wrongful acts or omissions for which an injured party can take legal action against the wrongdoer for monetary damages ANSWER: g POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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120. The unauthorized transfer of funds from a bank account ANSWER: b POINTS: 1 121. The typical standard of care, based on what a reasonable or prudent person would do under similar circumstances ANSWER: f POINTS: 1 122. Laws that obligate an employer to pay employees for injury or illness related to employment, regardless of fault ANSWER: i POINTS: 1 123. Risks that directly affect individual employees but may have an indirect impact on a business as well ANSWER: e POINTS: 1 124. Coverage that provides benefits to a firm upon the death of key personnel ANSWER: d POINTS: 1 125. Coverage that reimburses a business for the loss of anticipated income following the interruption of business operations ANSWER: a POINTS: 1 126. Coverage that provides benefits to employees injured at work ANSWER: h POINTS: 1 Match the term with its definition. a. automobile insurance b. coinsurance clause c. crime insurance d. design defect e. manufacturing defect f. marketing defect g. noneconomic damages h. personal property i. punitive damages DIFFICULTY: Easy REFERENCES: 23-2 Basic Types of Pure Risk 23-5 Common Types of Business Insurance QUESTION TYPE: Matching HAS VARIABLES: False LEARNING OBJECTIVES: SMAL.LONG.20.23.02 - LO: 23-2 SMAL.LONG.20.23.05 - LO: 23-5 NATIONAL STANDARDS: United States - BUS PROG: Promotion United States - BUSPROG: Analytic | Technology - BUSPROG: Analytic Copyright Cengage Learning. Powered by Cognero.

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TOPICS: KEYWORDS: DATE CREATED: DATE MODIFIED:

Operations Management Bloom's: Remember 8/29/2018 11:27 AM 1/3/2019 7:59 AM

127. A provision in a property insurance policy that requires the owner to have insurance for at least 80 percent of what it would cost to rebuild the building or replace the personal property ANSWER: b POINTS: 1 128. A defect resulting from failure to convey to the user that hazards are associated with a product or to provide adequate instructions on safe product use ANSWER: f POINTS: 1 129. Coverage designed to provide liability and physical damage protection for a vehicle ANSWER: a POINTS: 1 130. A defect resulting from a dangerous design, even though the product was made according to specifications ANSWER: d POINTS: 1 131. A form of punishment beyond compensatory damages that intends to punish wrongdoers for gross negligence or callous disregard and to have a deterrent effect. ANSWER: i POINTS: 1 132. Compensatory damages for such losses as pain and suffering, mental anguish, and loss of physical abilities ANSWER: g POINTS: 1 133. A defect resulting from a problem that occurs during the manufacturing process, causing the product to subsequently not be made according to specifications ANSWER: e POINTS: 1 134. Coverage primarily against employee dishonesty ANSWER: c POINTS: 1

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