Regardless of their level of sophistication, available accounting systems
a. rarely provide an accurate picture of operating results.
b. often do not reveal employee fraud, theft, waste, and record-keeping errors.
c. provide financial statements for internal use but not for external use.
d. should allow the firm to compare operating results from the current year with prior
years.
_____ is a promotion delivered in a one-on-one environment.
a. Personal selling
b. Sales promotion
c. Personal promotion
d. Advertising
In a family business, business decisions
a. often affect both the business and the family.
b. are never family decisions.
c. are seldom rational decisions.
d. are made by negotiation between family and nonfamily members.
Web-based businesses that provide customers with the ability to list products for
potential buyers are called
a. Internet auction sites.
b. B2B sites.
c. B2C sites.
d. C2B sites.
One of the most common problems for a founder in passing the business on to a son or
daughter 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. deciding whether the child has the necessary temperament and ability.
Using special-purpose equipment in the manufacturing process typically results in
a. increased operator errors.
b. higher costs of processing.
c. a rise in accident rates.
d. greater output per machine-hour of operation.
A small firm can try to increase sales of an existing product by all of the following
except
a. convincing nonusers in the market to become customers.
b. persuading current customers to use more of the product.
c. alerting current customers to new uses for the product.
d. emphasizing diversification.
All of the following are stages of consumer decision making except
a. post-purchase evaluation.
b. purchase decision.
c. problem recognition.
d. perceptual categorization.
Which of the following reflects how a partnership pays taxes?
a. It doesn’t pay any taxes.
b. It pays taxes as a partnership.
c. The partners each pay taxes on the total income.
d. The partners do not pay taxes if they own Section 1244 stock.
In the text, which particular demographic did Adorable Pet Photography choose as its
target market?
a. families with young children
b. first-time pet owners
c. older married couples
d. affluent “yuppies”
Social responsibilities go far beyond a firm’s relationships with customers, and typically
include diverse areas such as
a. protection of the environment.
b. educational activism.
c. consumer protection for all business dealings within the community.
d. protection of religious liberties.
Aaron Michels, a corporate account salesperson for Software Etc., is conducting a sales
presentation for a potential new customer. Following the presentation, the prospective
client states that her firm already uses a competing product. Intuitively, Mr. Michels
replies, “In that case, I”m certain that you are now ready to upgrade to the best product
available.” Mr. Michels’s response is an example of using
a. the boomerang technique.
b. admitting and counterbalancing.
c. the “Yes, but” approach.
d. comparisons.
The Americans with Disabilities Act requires employers to make _______ adaptations
to facilitate the employment of individuals protected by the act.
a. specific
b. minimal
c. reasonable
d. verifiable
Under which method/system of accounting are revenue and expenses reported when
they are incurred, regardless of when cash is received or payment is made?
a. Single-entry system
b. Double-entry system
c. Accrual method
d. Cash method
Raw materials and products held by the firm for sale constitute ________.
a. accounts payable.
b. accounts receivable.
c. cost of goods.
d. inventories.
To improve control of operations, a shop owner wishes to measure performance at the
process stage. The owner might
a. inspect raw materials.
b. use quality control.
c. set sales quotas.
d. improve personnel-selection methods.
Inventory is called an “evil” because it
a. ties up funds that are not actively productive.
b. reduces cash when it is sold.
c. is subject to deterioration.
d. is a large asset for many firms.
Perhaps the greatest barrier to international expansion is
a. labor limitations.
b. financing.
c. trade restrictions.
d. a shortage of qualified trade intermediaries.
All of the following are reasons for implementing a penetration pricing strategy except
a. to gain rapid market acceptance.
b. to discourage new competitors’ entry into the market.
c. to rapidly recover startup costs.
d. to increase existing market share.
Gomez is pricing his products at a lower than normal, long-range market price in order
to gain more rapid market acceptance. He is using a __________ strategy.
a. variable pricing
b. skimming price
c. penetration pricing
d. price lining
A corporate manager chafes under red tape and bureaucratic regulations until finally
deciding to start a separate business. The apparent reward being sought is
a. community service.
b. a satisfying way of life.
c. independence.
d. the satisfaction of working with people.
Because technologies are becoming increasingly sophisticated, expensive, and
short-lived,
a. it is more important than ever to recover R&D costs quickly by expanding the market
globally.
b. entrepreneurs struggle to compete in high-end technologies used in fast-paced
markets.
c. only large corporations should attempt to compete in cutting-edge, high-tech
industries.
d. the pace of innovation has started to show signs of deceleration.
A corporate marketing executive is moving to a managerial position in a small firm,
where she may logically expect to find
a. adequate financial resources and adequate staff.
b. inadequate financial resources and inadequate staff.
c. adequate financial resources and inadequate staff.
d. inadequate financial resources and adequate staff.
A good reason for relocating a typical manufacturing business is to
a. stabilize income taxes.
b. increase customer traffic.
c. get closer to raw materials.
d. provide free-flow space.
The ethical influence of a leader of a small business 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 that of a leader of a large corporation.
Small firms are likely to be tempted to act unethically because
a. founders or owners of small businesses are usually crooked.
b. breaking the rules often seems to be the only way to make a profit and survive.
c. small businesses are exempt from federal regulations.
d. Better Business Bureaus don’t deal with small businesses.
Using the textbook’s criteria for defining a small business, Portland Ceramics isn”t a
small business if it
a. is financed by one or only a few individuals.
operations.
b. is considerably smaller than larger firms in the industry.
c. is engaged in geographically dispersed
d. has fewer than 100 employees.
If a retailer’s estimated sales are $1 million and assets in the firm’s industry tend to run
about 25 percent of sales, the retailer should maintain assets of
a. $250,000.
b. $500,000.
c. $4,000,000.
d. $25,000,000.
A pricing tactic whereby a firm sets a high price to convey an image of high quality or
uniqueness is known as
a. skimming pricing.
b. penetration pricing.
c. variable pricing.
d. prestige pricing.
When a firm borrows money, it is required, at a minimum, to pay
a. part of the principle (the sum borrowed).
b. the interest on the debt.
c. part of the principle and the interest owed on the debt.
d. the taxes that accrue as a result of the money borrowed.
You Make the CallSituation 1
A small firm specializing in the sale and installation of swimming pools was profitable
but devoted very little attention to management of its working capital. It had, for
example, never prepared or used a cash budget. To be sure that money was available for
payments as needed, the firm kept a minimum of $25,000 in a checking account. At
times, this account grew larger; it totaled $43,000 at one time. The owner felt that this
approach to cash management worked well for a small company because it eliminated
all of the paperwork associated with cash budgeting. Moreover, it had enabled the firm
to pay its bills in a timely manner.
Question 1 What are the advantages and weaknesses of the minimum-cash-balance
practice?
Question 2 There is a saying “If ain”t broke, don”t fix it.” In view of the firm’s present
success in paying bills promptly, should it be encouraged to use a cash budget? Be
prepared to support your answer.
You Make the CallSituation 1
When they created Round Table Group (RTG) Inc., Russ Rosenstein and Robert Hull
envisioned a company offering one-stop shopping for intellectual expertise. They
wanted to help businesspeople, management consultants, and litigation attorneys get
answers to important questions from topnotch thinkers anywhere in the world through
the Internet.
RTG’s plan was to have a kind of SWAT team of professors who would answer
questions based on their expertise. A team might consist of one or two professors, who
would communicate with the client via e-mail, phone, or videoconferencing on projects
that might involve a few hours or a few weeks of input. In the traditional
management-consulting model, work on a project often lasts as long as a couple of
years, and the team consists of a group of junior analysts, managers, and partners.
RTG assembled a database made up mainly of 3,000 university professors available to
consult on an as-needed basis. The firm’s fixed costs would be low because the
professors would be paid only when they did billable work. But an unexpected wrinkle
soon emerged. RTG’s customers wanted RTG to start acting more like a traditional
consulting firm. Business executives wanted face-to-face contact with the professors
giving the information. They also wanted number crunching and follow-up analysis.
And they wanted current, customized research.
That has left RTG at a crossroads. Should it try to become a more traditional
management-consulting firm or continue to pursue its original mission of providing
advice through Internet content and virtual links?
Taking the first path would mean providing support to clients, adding infrastructure and
formalizing its operation by dividing it into distinct specialties. That would have the
downside of making RTG’s competitive point of differentiation murky. But the second
path would risk putting off clients who say they want more.
Source: Elena De Lisser, “A Plan May Look Good, but Watch Out for the Real World,”
Startup Journal, The Wall Street Journal Online,
http://www.startupjournal.com/howto/management/199908240948-lisser.html, January
15, 2004.
Question 1 What is the basic problem that Rosenstein and Hull need to resolve?
Question 2 What are the advantages and disadvantages of the proposed online
consulting and the traditional approach to consulting?
Question 3 What do you think Rosenstein and Hull should do?
Discuss the function of a master licensee.
Job instruction training is characterized by six easy steps.
The family business culture complicates the process of leadership succession.
In the entrepreneurial family, the natural tendency is to think in terms of a family
business career and to push a child in that direction.
You Make the CallSituation 3
Alibek Iskakov recently opened a small cafe, called Oasis, in Kokshetau, a city in
Kazakhstan. The cafe, which is quite small, has seating for 20 customers and employs 7
people. Iskakov, the owner, has no experience in the restaurant business but has three
years’ experience in retailing and managing. He believes this experience will help him
make intelligent decisions concerning management of the cafe. Iskakov oversees
operations and assists wherever needed.
Zhanna Suleymenova was hired by Iskakov as an accountant and assistant manager. He
hired her to be sure someone would always be at the cafe. He expects her to do the
accounting and to make suggestions that will help him operate the cafe efficiently. She
is the key person in the operation, with sound accounting experience and a little food
service experience. The other employees are two cooks, two waitresses (who double as
hostesses and bartenders), and a dishwasher.
Thus far, the cafe’s operations have not run smoothly.
Source: This case was prepared by Dr. Aigul N. Toxanova and Yuliya L. Tkacheva,
Kokshetau Institute of Economics and Management, Kokshetau, Kazakhstan.
Question 1 What is the most obvious weakness in the human resource management of
this small cafe?
Question 2 Given that the restaurant has just opened, is it overstaffed or understaffed?
Publicity is accurately described as free advertising.
Financial statements can mislead a potential purchaser trying to develop an accurate
business valuation.
Creating a partnership allows a business to pool the managerial talents and capital of
those individuals joining together as partners.
In Stage IV of leadership succession, the functional stage, the successor enters full-time
employment.
The term quality may be defined as the manufacture of products that are free of defects.
Though software packages can be helpful in generating required accounting records,
only a limited number of these are appropriate for use in a small firm.
The Consumer Credit Protection Act requires that the finance charge for credit be stated
as an annual percentage rate and that creditors specify the procedures used for
correcting billing mistakes.
Most startups are initiated by entrepreneurs who have visions of getting rich.
Explain the nature of and the differences among microbusinesses, attractive small firms,
and high-potential ventures.
The form of ownership of a business has no effect on income taxes.
Though all financial statements are important, the cash flow statement deserves special
attention.
To reduce costs, a franchise consultant can substitute for a licensed attorney
experienced in the evaluation of legal documents related to franchising agreements.
If staff specialists begin to give orders instead of being helpers, they destroy the unity of
command.