With a foreign licensing strategy, the company purchasing the right to manufacture and
sell a product in overseas markets is called the
a. royalty receiver.
b. licensor.
c. licensee.
d. license initiator.
The big picture includes all of the following EXCEPT:
a. the management team.
b. the regulatory environment.
c. interest rates.
d. inflation.
Jackie’s stockholders are primarily concerned that she constantly improve the firm’s
_____ ratio as it relates to their investments in the firm..
a. return on total assets
b. profit margin on sales
c. return on equity
d. fixed asset turnover
Importing can be described as the
a. “flip side” of exporting.
b. sale of products produced in the home country to customers in another country.
c. purchase of the right to manufacture and sell a firm’s product in overseas markets.
d. authorized use of intellectual property.
A _______ mortgage would likely be used to secure financing for mobile construction
office.
a. chattel
b. real estate
c. revolving
d. term
Better Business Bureaus are
a. federal government agencies established by Congress.
b. part of the Chamber of Commerce.
c. organizations composed of business firms.
d. associations of religious groups interested in the improvement of business ethics.
Manufacturing operations are generally characterized by
a. little customer contact and intangible products.
b. measurable productivity and intangible products.
c. measurable productivity and little customer contact.
d. tangible products and measurable productivity.
The turnover ratios for accounts receivable and inventories
a. should both be included in the financial analysis of a firm.
b. are measures of very different things.
c. often lead to very different conclusions about the firm.
d. represent different ways to measure the same thing.
If an entrepreneur has decided to go global, the next step is to
a. begin to hire employees with international experience.
b. spend some time estimating the market potential of various countries.
c. join a trade mission.
d. plan a strategy that takes into account the potential of the firm.
Bait advertising consists of an
a. alluring but insincere offer to sell a product.
b. attempt to sell a product that adversely affects the environment.
c. attempt to sell a defective and possibly unsafe product.
d. advertisement of expensive products.
When fathers train their children in the family business, the typical problem is
a. ambitious fathers.
b. disloyal children.
c. reluctant fathers.
d. capable children.
Explicit functions of packaging include all of the following except
a. increasing the quality of the total product.
b. distinguishing the product from competitors’ products.
c. influencing customers.
d. protecting the product.
Juan’s belief that all diet sodas taste awful is an example of
a. cognitive dissonance.
b. an evoked set.
c. perceptual categorization.
d. unilateral indifference.
A product strategy that includes a new product that is quite different from existing
products
a. can be very risky.
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.
A coinsurance provision requires that a property be insured for at lease ______ percent
of its value.
a. sixty
b. seventy
c. eighty
d. ninety
Though often assumed to be the same, profits shown on a company’s income statement
are not the same as its
a. owners’ total compensation.
b. financial performance.
c. cash flows.
d. taxable income.
The owner of a small printing plant wishes to begin a preventive maintenance program.
The owner should make plans for
a. contracting with an outside firm for major repair services.
b. hiring millwrights.
c. periodic equipment inspections.
d. installing process control charts.
The question “How does the present value of future benefits from the investment
compare to the initial investment outlay?” is answered using
a. analysis of long-term investment.
b. investment outlay valuation.
c. ratio analysis.
d. discounted cash flow analysis.
Leadership in small firms is more _______ in comparison to the leadership in large
corporations.
a. haphazard
b. impersonal
c. personalized
d. more skillful
The owners of small firms have a tendency to ________ the amount of capital their
business requires.
a. downplay
b. ignore
c. overestimate
d. underestimate
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. cash flow statement.
A disadvantage of a sole proprietorship is
a. the complexity of the organization.
b. the cost of starting the business.
c. the lack of limits on personal liability.
d. the difficulty of distribution.
Forming from scratch a wholly owned subsidiary in another country is what can be
most accurately described as
a. a greenfield venture.
b. a cross-border acquisition.
c. an international transplant.
d. a duplication strategy.
Mike Prinz has noticed that his operating income is decreasing yet he has managed to
keep his operating expenses from increasing and sales are increasing. What is
happening to cause the change in operating income?
a. His receivables are increasing.
b. His liabilities are increasing.
c. His cost of goods is increasing.
d. His gross profit is decreasing.
In an effort to ascertain the average dollar amount of credit card purchases at their store,
managers of Component City, a stereo and appliance dealer, reviewed in-store copies of
credit card sales receipts from the previous three months to evaluate the store’s credit
card acceptance policies. Component City’s managers are conducting marketing
research by collecting and analyzing
a. primary data.
b. observational data.
c. questioning data.
d. secondary data.
The measurement techniques mentioned in the textbook include all of the following
except
a. accounting return on investment.
b. payback period.
c. discounted cash flow technique.
d. the current accounts approach.
Specialties are promotional tools that can
a. create goodwill for the company.
b. prevent price competition.
c. allow customers to sample the product.
d. cast doubt on the products offered by competitors.
Resource Recovery Systems, a waste-recycling business, stresses maintenance of
equipment in order to
a. avoid interruptions in the company’s recycling operations.
b. meet OSHA requirements.
c. reduce skyrocketing costs.
d. utilize otherwise idle labor.
Which source of information is not recommended to help a potential franchisee
investigate a franchising opportunity?
a. The franchisors themselves
b. The franchisor’s suppliers
c. Existing and previous franchisees
d. Independent, third-party sources
The owner of an industrial distribution company has attended a seminar on quality
management and is determined to improve quality performance. This owner should
recognize which of the following about training employees in quality?
a. Quality training can teach employees about the importance of quality and ways to
produce high-quality work.
b. Direct supervisory one-on-one instruction is the only training procedure that shows
consistent results.
c. Quality training gradually raises quality consciousness but must be pursued for two
or three years before significant improvements can be detected.
d. Quality performance and workmanship are not good topics for training because
careful work habits must be developed, if they are ever developed, on a personal basis
over many years.
As described in the textbook, a Type C idea involves
a. a technically new process.
b. performing an old function in a new and improved way.
c. using prior work experience as a basis for starting a new business.
d. providing customers with a product or service absent in their market but available
elsewhere.
The ultimate judge of product quality is
a. the customer.
b. W. Edwards Deming.
c. the owner of the business.
d. the American Society for Quality Control.
You Make the CallSituation 4
Frank Wheat’s small construction business in Gulf Shores, Alabama is rapidly
expanding due to the tremendous amount of storm damage wrought by Hurricane Ivan.
Based on his previous experience with reconstruction after Hurricane Frederick, Frank
believes there will be a steady amount of contract construction work for several years to
come. Gulf Shores was in the middle of a sustained construction boom when the
hurricane struck and repairing the damage will only add to an already superheated
demand for residential and commercial buildings. Frank’s firm is also experiencing high
turnover of its skilled tradespeople as other firms compete for scare available labor. It
has become increasingly difficult to hire and retain qualified personnel.
Frank has asked you for help in deciding whether or not to hire a full-time human
resource manager.
Question 1 What advice would you give Frank about the need for a human resource
manager in his firm?
Question 2 What conditions exist that would favor the appointment of human resource
manager?
Financial projections are just a management frill.
The competitive advantage of a firm will affect consumers’ demand for its product.
One of the advantages of a sole proprietorship is its continuity.
You Make the CallSituation 3
Alibek Iskakov has opened a small cafe, Oasis, in Kokshetau, a city in Kazakhstan. A
new business in operation for only a short period on a part-time basis in a
less-developed country, it has small revenues. Nevertheless, ratio analysis can be used
for a quick check on its status. The following amounts are given in tenge (1 dollar = 120
tenge), the Kazakhstan currency.
Source: This case was prepared by Dr. Aigul N. Toxanova and Yuliya L. Tkacheva,
Kokshetau Institute of Economics and Management, Kokshetau, Kazakhstan.
Question 1 Compute the firm’s accounts receivable turnover. Do you think that this
ratio is relevant for this business? Why or why not?
Question 2 What is the firm’s return on assets? Without the benefit of an industry norm
for comparison, do you think that this is a good return on the owner’s investment?
Question 3 What is the firm’s return on equity? How does debt financing affect this
return?
List two methods of selling common stock, and discuss each method.
If they identify closely with their ventures, entrepreneurs may bear psychic risk as they
face the possibility of business failure.
The marketing plan should identify user benefits and show evidence of consumer
interest.
Startups that are based on complex technologies are more likely to gain benefits from
learning effects and economies of scale.
List four reasons for buying an existing business.
Advertising is considered to be part of sales promotion.
International franchising is essentially an alternative form of exporting.
The industry environment can best be defined as the combined forces that directly
impact a given firms and its competitors.
Bequeathing equal shares of ownership to children in a family business will probably
create havoc in the future functioning of the business.
A small firm should act aggressively in recruiting, taking the initiative in locating
applicants.