ENTREPRENEURSHIP 1
1. Vendors who sell goods to buyers on the condition that the buyers can return any portion of the goods not sold in a specified period of time are using a technique called ______buying. A. anticipation C. consignment B. replenishment D. memorandum
2. What category of business risk is caused by employees and customers? A. Natural C. Human B. Economic D. Uninsurable
3. The ABC Company publishes an incorrect statement about the quality of the Marston Company's product. As a result, Marston's sales have dramatically decreased. This is an example of a legal tort related to A. trespassing. C. infringement. B. privacy. D. defamation.
4. Businesses usually are unable to enter into legally binding contracts with A. senior citizens. C. foreigners. B. minors. D. tourists.
5. When the YRQ Company pays its entry-level employees the lowest amount of money per hour that the government allows, it is complying with A. labor-union regulations. C. minimum-wage laws. B. worker-compensation rulings. D. equal-credit policies.
6. Jackie needs to raise a high amount of capital to open additional restaurants. She wants to limit her personal liability. She should consider establishing her business as a A. corporation. C. general partnership. B. limited liability partnership. D. sole proprietorship.
7. Which of the following is the type of tax that businesses are required to collect from customers when they purchase certain goods or services: A. Estate C. Sales B. Income D. Corporate
8. A rancher in New Mexico arranged to sell a herd of cattle to a major meat-packing company in Chicago which sells beef to several grocery store chains. The channel of distribution the rancher would most likely use is A. producer to wholesaler. C. producer to agent to user. B. producer to consumer. D. producer to retailer to consumer.
9. When selecting distribution channel members, geographic location and the end users are important ______considerations. A. leadership C. competitive B. product D. market
10. To expand into foreign markets, an American business owner acquires a small manufacturing plant in Thailand. Which of the following entry modes is the business owner using to expand the company internationally? A. Joint venture C. Independent trade intermediary B. Wholly owned subsidiary D. Franchise
11. What is one of the main reasons why small businesses are strongly promoted and supported by local government? A. They are owned by one person. C. They may become a big business. B. They are important to the economy. D. They serve only their local communities.
Copyright © 2014 by MBA Research and Curriculum Center®, Columbus, Ohio ENTREPRENEURSHIP 2
12. The manager of a large home-improvement store has decided to use a work team to help the company improve customer service. Members of the team have been asked to develop goals and objectives for the project. Having team members agree on the purpose of their project is a way to build ______to the team and its work. A. creativity C. conflict B. communication D. commitment
13. Ethan has health insurance through his employer. Each time Ethan needs medical attention, he must write a check in the amount of $25.00 to the doctor's office to cover his out-of-pocket expense. This out- of-pocket expense is Ethan's A. surrender charge. C. copayment. B. total premium. D. waiver.
14. Calculate the yearly premium for a business obtaining insurance on property that is valued at $250,000 if the monthly rate is $50 for each $25,000 worth of property. A. $5,250 C. $7,500 B. $6,000 D. $8,000
15. Which of the following is an important question that businesses must answer when obtaining credit: A. How will they handle former customers? C. How many employees will they promote? B. How often will they raise prices? D. How will they spend the money?
16. What are usually the two most important services that businesses want from a bank? A. Safe-deposit boxes and financial advice C. Checking accounts and loans B. Money orders and credit cards D. Certified checks and savings accounts
17. Why are most businesses willing to pay the costs associated with accepting bank cards? A. To improve cash flow C. To increase sales B. To monitor assets D. To decrease financing
18. A business has a variable interest rate loan, and the rate increases far more than the business expected. This is one of the ______of obtaining credit. A. fees C. risks B. penalties D. limits
19. One reason why banks might be reluctant to lend money to a start-up business is because the business A. must incorporate first. C. has a solid business plan. B. will not have collateral. D. has no record of repaying loans.
20. What type of financial documents are businesses usually expected to provide banks when completing an application for a loan? A. Real estate deeds C. Stock certificates B. Cash flow statements D. Equipment lists
21. When Kim develops her department's annual budget, she should consider historical data and A. warehousing costs. C. personal needs. B. professional development. D. anticipated expenses.
22. What sales forecasting technique creates accurate forecasts for individual products? A. Delphi C. Survey of buyer intentions B. Sales force composite D. Jury of executive opinion
23. Excise taxes that are collected by businesses are paid by them to the ______government. A. city C. county B. state D. federal ENTREPRENEURSHIP 3
24. What is the total amount of cash outflow if a business buys $8,500 worth of goods for resale this month and negotiates with the vendor to pay 65% of that amount in 60 days? A. $2,550 C. $5,100 B. $2,975 D. $5,525
25. ABC Company has 1,000 major clients that each require a monthly sales call. If the average sales representative can make 1,000 calls per year, how many sales representatives does ABC need to ensure service to all of its major clients? A. 18 C. 15 B. 10 D. 12
26. One reason for screening résumés is to determine if the applicants A. possess the ability to improve their computer skills. B. have the desired skills to perform a specific job. C. exhibit ethical behavior and are organized. D. are efficient and highly productive.
27. Why is it important to ask job applicants about their training and previous job responsibilities during the interview process? A. To establish specifications C. To analyze personality types B. To review recommendations D. To determine qualifications
28. An important part of employee compensation is the A. benefit package. C. intangible reward system. B. wage garnishment. D. discount rate.
29. Which of the following is considered legal: A. Not to hire Juan because he was born in Mexico B. Not to hire Marie because she has two small children C. To refuse to hire Louis because of his arrest record D. To refuse to hire John because a female is needed to model swimsuits
30. Which of the following policies would best allow a ski resort to meet a temporary increase in demand for service without sacrificing productivity or increasing costs: A. Using employment agencies to supply temporary workers B. Increasing the work hours of current employees C. Cross-training employees to perform several different jobs D. Hiring additional employees
31. What is a company using when it lets its current employees know about a new job opening and encourages them to apply? A. Employee turnover C. External recruiting B. Internal recruiting D. Group incentive
32. Critical information that should be an aspect of a new employee's orientation includes A. company policies and regulations. C. employee qualifications. B. on-the-job training. D. formal training classes.
33. An important step in the process of coaching employees involves ______with employees. A. following up C. bargaining B. socializing D. negotiating
34. Awarding post-event parties, keepsake gifts, and free admission to some event activities are ways that golf tournament organizers might show their ______to volunteers. A. wealth C. appreciation B. creativity D. indifference ENTREPRENEURSHIP 4
35. Which of the following is acceptable behavior for a retail salesperson: A. Allow customers to help themselves. B. Help only those customers who ask for help. C. Sell eagerly with authority and professionalism. D. Sell only to meet sales quotas.
36. Should employees be part of management's efforts to create an equitable work environment? A. Yes, this is a legal requirement. C. Yes, employees should be involved. B. No, this is management's responsibility. D. No, including employees will create problems.
37. What technique might a supervisor use with employees who are violating company rules before resorting to penalizing them? A. Personal training C. Educational planning B. Basic conditioning D. Corrective counseling
38. Emily's compensation is $445 per pay period, and her employer withholds $65 for federal income tax, $32 for Social Security, and $12 for state income tax. How much is Emily's net pay? A. $306 C. $345 B. $336 D. $356
39. Why do many Internet companies maintain and update their customer database on a regular basis? A. To reduce wasted marketing efforts B. To accelerate website download time C. So their promotional budgets can be increased D. So Internet service provider fees can be reduced
40. What type of marketing information might a business obtain by monitoring accounts receivable records? A. Promotional history C. Sales territory B. Product description D. Customer satisfaction
41. Which of the following is a personnel policy that often improves an employee's quality of life on the job: A. Training required to use new equipment C. Benefit programs available to management B. Scheduling arranged on a random basis D. Promotions decided by immediate supervisor
42. One reason managers often delegate responsibility for certain routine jobs to employees is so the managers can A. spend more time doing management work. C. decide which employees to promote. B. blame others if mistakes are made. D. avoid performing unpleasant assignments.
43. What training technique involves simulation of a real work situation? A. Case studies C. Role-playing B. Brainstorming D. Programmed instruction
44. Providing useful, constructive feedback to employees about their job performance often increases the employees' A. compensation. C. evaluation. B. motivation. D. orientation.
45. Which of the following is a factor that might indicate that a business's employees have low morale: A. Occasional accidents C. Limited turnover B. Frequent tardiness D. Average productivity
46. Which of the following sources of start-up information would you recommend to an entrepreneur looking for information about the average start-up and operating costs for a self-serve laundromat: A. Small Business Administration C. Local chamber of commerce B. Service Corps of Retired Executives D. Coin laundry trade association ENTREPRENEURSHIP 5
47. Which of the following is an example of a consumer market: A. Schools buying chairs for classroom use B. Businesses buying vehicles for salespeople C. Workers buying lunch at a local restaurant D. Companies buying equipment for a machine shop
48. A primary reason that businesses identify market segments is because consumers A. demand high-quality goods. C. have different needs and wants. B. desire the same level of service. D. are not loyal to popular brands.
49. When a business selects a target market, the most useful or desirable market segments to the business are those that are measurable and A. accessible. C. concentrated. B. undifferentiated. D. inflexible.
50. One reason why businesses try to identify and analyze threats in the marketplace is to take steps to turn those threats into A. activities. C. procedures. B. strengths. D. opportunities.
51. When a business conducts a market analysis and identifies territories, determines the possible buyers in the territories, and estimates the buyers' purchases, it is evaluating the A. competitors' market share. C. potential media exposure. B. segment's psychographics. D. area's market potential.
52. What type of SWOT interviews work best? A. One-on-one C. Large group B. Small group D. Telephone
53. An important reason why businesses set clear marketing goals and objectives is to A. state what the business hopes to achieve. B. decide the amount of profit to forecast. C. establish a time frame to succeed in the market. D. find out how to appeal to the right customer base.
54. Which of the following is the most appropriate budgeting method for a business to use when it is setting priorities and selecting marketing activities to meet the business's marketing objectives: A. Percentage-of-sales C. Rolling B. Task D. Past performance
55. One reason it is important for a business to develop a marketing plan is that the plan A. reduces the need to implement corrective action or contingency plans. B. provides guidelines for personnel to meet the company's objectives. C. increases the business's financial security in an unpredictable environment. D. allows the business to focus on short-term goals instead of long-term goals.
56. Businesses evaluate the performance of their marketing plans by comparing the results with the original marketing A. strategies. C. priorities. B. objectives. D. alternatives.
57. After Selina caters an event, she makes sure to save her client's information for future use. This is an example of the following stage in a record's life cycle: A. Creating C. Storing B. Destroying D. Retrieving ENTREPRENEURSHIP 6
58. Businesses establish safety policies to protect employees from A. negative feedback. C. unusual circumstances. B. workplace conflicts. D. hazardous conditions.
59. The digital-movie industry has responded to pirating by A. giving permission for viewers to make copies of digital movies for nonpersonal use. B. slowing down the release of DVDs until pirating is made illegal. C. relying on DVDs to make up for lost revenue caused by pirating. D. employing technology that prevents the free copying of digital movies.
60. One way that businesses can identify new sources of vendors is by A. attending trade shows. C. organizing a product list. B. contacting competitors. D. reading in-house brochures.
61. One reason why it is important for a business to correctly fill out information about credit terms and shipping instructions when ordering goods is because the purchase order is a A. legal contract. C. payment record. B. receiving document. D. delivery form.
62. What should management do to help employees achieve the business's expectations of quality? A. Offer incentives C. Pay bonuses B. Set goals D. Cut costs
63. Why do businesses feel it is important to maintain accurate accounting records? A. To monitor financial status C. To develop inventory control B. To prepare purchase orders D. To review employee performance
64. Why would the SCW Company conduct a break-even analysis? A. To ensure that the company is complying with regulations B. To compare its business's activities with its competitors' activities C. To evaluate its income in relation to its expenses D. To determine the optimal selling price for a good or service
65. What action would most likely help to control a business's expenses if it frequently paid costly penalties to the Internal Revenue Service for forgetting to deposit withheld payroll taxes? A. Creating a budget plan of equal payments C. Hiring an outside payroll processing company B. Preparing payroll expenses D. Making balloon payments
66. Entrepreneurs protect the profitability of their businesses by developing which of the following skills: A. Domestic and team-building C. Language and operations B. Passive and technical D. Financial and problem-solving
67. Which of the following is a characteristic of e-commerce: A. Generates shopping software C. Develops computer networking B. Creates customer convenience D. Arranges electronic communication
68. Which of the following is a factor that often causes an increase in the selling price of goods and services: A. High unemployment C. Inelastic demand B. Economic growth D. Abundant supply
69. Calculate the variable cost per unit for Videos to Go, which has total sales revenues of $95,200, charges $4.00 for two days' rental, and has total variable costs of $31,500. A. $3.17 C. $2.52 B. $2.10 D. $1.33 ENTREPRENEURSHIP 7
70. A 15% markdown on an item regularly priced at $29.99 would mean a reduced selling price of A. $25.04. C. $25.49. B. $24.59. D. $4.50.
71. Which of the following factors do businesses consider when determining the final cost of a product: A. Transportation charges C. Accounts payable B. Operating expenses D. Current liabilities
72. One of the main disadvantages of using the cost-based method for setting base price is that it fails to take into consideration A. competitors' prices. C. production costs. B. marketing charges. D. operating expenses.
73. Which of the following departments in many businesses is responsible for generating product ideas: A. Executive management C. Research and development B. Information technology D. Sales and marketing
74. When determining the initial feasibility of a product idea, the first question to answer is A. will this product meet a specific need in the marketplace? B. can this product be obtained at a good price from suppliers? C. will additional staff need to be hired to handle the product? D. can this product be distributed in foreign markets?
75. If a company's follow-up activities indicate that a customer had a positive buying experience, the company is likely to obtain A. sales quotas. C. free advertising. B. unfavorable publicity. D. repeat sales.
76. Which of the following is an example of a product item: A. Cheeseburgers C. Men's apparel B. An assortment of frozen foods D. Health and beauty aids
77. What should a company do to identify specific products that its target market may want in the future? A. Monitor trends C. Improve quality B. Forecast sales D. Review budgets
78. ABX Corporation is planning its product mix and must consider the items to include in its product line. The ABX Corporation must consider the differences in the items' A. resources. C. objectives. B. reach. D. quality.
79. Why is it important for businesses to maintain their websites? A. To guarantee privacy C. To eliminate linking B. To keep visitors returning D. To organize a site map
80. A mid-priced automobile company provides customers with free transportation while their cars are being repaired. What attribute is the company using to gain the competitive advantage? A. Loyalty C. Service B. Safety D. Performance
81. Whenever possible, an effective brand name should always be A. unrelated to product features. C. related to other brands. B. multiple syllables and flashy. D. short and memorable. ENTREPRENEURSHIP 8
82. When a business emphasizes a specific aspect or an element of a product to differentiate it from the competition, it is using a positioning strategy based on A. customization. C. the competitors' weaknesses. B. value pricing. D. the product's attributes.
83. A business's strengths and competitive advantages are critical in brand development and can often be found in the business's A. press releases. C. name and slogan. B. FAQs on the Internet. D. business plan.
84. Which of the following is a consideration when a restaurant is selecting suppliers: A. The supplier's market share C. Operating expenses B. The dependability of the supplier D. Tying agreements
85. When auto-parts stores negotiate terms with vendors, the stores are negotiating A. shipping costs. C. markdowns. B. discounts. D. credit options.
86. A company distributes a cents-off coupon as an incentive for consumers to purchase a particular item. This type of promotion is called ______promotion. A. place C. product B. corporate D. public relations
87. Timeliness is an advantage of which of the following types of promotional media: A. Billboards C. Directory B. Magazines D. Newspapers
88. The main reason advertisers often purchase a series of spot radio announcements to be given at certain times over a week or month is to A. reduce the need to use other media. C. help the station to fill air time. B. reduce the cost of each spot. D. air spots only during prime time.
89. Which of the following choices, or combination of choices, would be the best way for a bank in a small town to reach a majority of the town's population: A. Neighboring, metropolitan, daily newspaper and local, weekly newspaper B. National, daily newspaper only C. Local, weekly newspaper only D. Neighboring, metropolitan, daily newspaper and national, daily newspaper
90. A business buys advertising for a 12-month period in a local magazine and receives a volume discount. Based on the following rate structure, how much will the business pay for $145,000 worth of advertising?
Dollar Volume Percent of Discount $65,000 or more 5% $92,000 or more 7% $120,000 or more 9% $163,000 or more 11% $200,000 or more 15%
A. $129,050 C. $126,550 B. $131,950 D. $134,850 ENTREPRENEURSHIP 9
91. What should copywriters avoid doing if their material carries over to a second page? A. Listing contacts C. Splitting sentences B. Including photographs D. Creating headlines
92. A general guideline for a business to use in deciding what to publicize is to publicize A. activities the competition is publicizing. C. general human-interest stories. B. all of the business's activities. D. activities that will interest the public.
93. Using the affordable method of preparing a promotional budget, calculate the amount that is available to spend on promotions based on the following information: $863,750 in total revenue; $855,500 in sales; $420,250 in salaries and wages; $397,325 in other operating expenses. A. $46,175 C. $42,055 B. $39,695 D. $37,925
94. One reason that a sales manager might evaluate the sales volume of a specific product is to A. measure customer loyalty in terms of overall reorder sales. B. determine if the item should be eliminated from the product line. C. evaluate the company's overall financial status. D. rate the relationship between sales personnel and their customers.
95. A business manager sharing with a few employees certain negative information in another employee's performance evaluation is an example of A. unethical behavior. C. impartial feedback. B. sound judgment. D. office communication.
96. In which section of the business plan will Elena put extra supporting information? A. Company description C. Executive summary B. Table of contents D. Appendices
97. Which of the following characteristics is descriptive of a meaningful company objective: A. Unlimited C. General B. Vague D. Measurable
98. An effective mission statement should effectively reflect the business's A. specific goals. C. ethics policies. B. core values. D. touch points.
99. A competitive analysis should be included in which component of the business plan? A. Executive summary C. Appendices B. Market analysis D. Financial plan
100. The income that a business earns before expenses are deducted is referred to as the A. overhead. C. net profit. B. net sales. D. gross profit. ENTREPRENEURSHIP 10
1. D BA008MC008 31. B HR498MC011 61. A OP016MC005 91. C PR057MC072 2. C BA036MC011 32. A HR361MC029 62. B OP020MC019 92. D PR055MC063 3. D BL069MC008 33. A HR364MC010 63. A OP024MC040 93. A PR098MC015 4. B BL002MC008 34. C HR365MC001 64. D OP192MC037 94. B SE056MC028 5. C BL007MC027 35. C HR368MC005 65. C OP029MC011 95. A SM002MC019 6. A BL006MC020 36. C HR367MC019 66. D PD066MC016 96. D SM007MC052 7. C BL009MC003 37. D HR369MC031 67. B PD119MC007 97. D SM008MC002 8. A CM003MC07 38. B HR352MC014 68. B PI002MC108 98. B SM009MC002 7 9. D CM010MC04 39. A IM231MC001 69. D PI006MC063 99. B SM013MC022 2 10. B EC066MC002 40. D IM186MC003 70. C PI008MC039 100. D SM005MC005 11. B EC065MC001 41. A MN039MC00 71. A PI019MC047 9 12. D EI044MC002 42. A MN119MC01 72. A PI018MC004 0 13. C FI081MC041 43. C MN020MC01 73. C PM128MC002 6 14. B FI082MC006 44. B MN130MC00 74. A PM129MC042 5 15. D FI023MC021 45. B MN155MC00 75. D PM138MC015 2 16. C FI039MC009 46. D MN187MC00 76. A PM003MC006 1 17. C FI040MC023 47. C MP003MC028 77. A PM130MC032
18. C FI041MC005 48. C MP004MC033 78. D PM006MC032
19. D FI034MC001 49. A MP005MC034 79. B PM113MC002
20. B FI033MC007 50. D MP008MC052 80. C PM042MC016
21. D FI099MC023 51. D MP009MC040 81. D PM021MC113
22. B FI096MC028 52. A MP010MC034 82. D PM043MC058
23. D FI090MC002 53. A MP015MC009 83. D PM126MC007
24. B FI100MC014 54. B MP017MC040 84. B PM263MC014
25. D HR353MC003 55. B MP018MC014 85. B PM264MC001
26. B HR354MC026 56. B MP022MC001 86. C PR002MC110
27. D HR355MC018 57. C NF001MC041 87. D PR007MC015
28. A HR390MC002 58. D OP012MC016 88. B PR009MC047
29. D HR356MC014 59. D OP105MC003 89. A PR010MC118 ENTREPRENEURSHIP 11
30. C HR497MC010 60. A OP242MC004 90. B PR104MC021
1. D Memorandum. This buying method allows the buyer to purchase goods for resale but receive allowances on goods not sold by a predetermined date. The title for the goods does pass to the buyer, and s/he does pay the invoice when goods are received. Replenishment buying allows a buyer to purchase goods to maintain minimum inventory levels that will cover projected sales for a specified period of time. Anticipation buying allows a retailer to acquire new goods that may not have been previously available. In consignment buying, the seller retains the title to the goods, and the buyer does not pay for the merchandise until it is sold. SOURCE: BA:008 SOURCE: p. 435, Retailing. Lewison, D.M., Prentice-Hall, 6th ed., 1997.
2. C Human. Human risks are the result of the fact that people are not perfect. Both employees and customers may be risks to the business because they are careless, dishonest, or accident-prone. The business can protect itself from loss caused by many of these insurable risks by purchasing insurance. Economic risks are those caused by changes in the market. Risks that result from causes such as floods, fires, and earthquakes are natural risks. SOURCE: BA:036 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2010). Marketing dynamics: Teacher's edition (2nd ed.) [pp. 401-402]. Tinley Park, IL: Goodheart-Willcox Company, Inc.
3. D Defamation. A tort is a private wrongdoing against a person or business. Defamation involves making false statements about another party with the intent to discredit or hurt the other's party's reputation. In the example, ABC's incorrect statement about Marston's products hurt Marston's sales. In response, Marston may file a lawsuit against ABC on the grounds of defamation. The situation is not related to privacy, infringement, or trespassing. SOURCE: BL:069 SOURCE: McAdams, T., Neslund, N., & Neslund, K. (2007). Law, business, and society (8th ed.) [pp. 252-253]. Boston: McGraw-Hill/Irwin.
4. B Minors. Businesses usually are prevented from entering into legally binding contracts with certain groups of people because these people are not considered to have the capacity to understand the consequences of their actions. One of these groups includes minors, those people under the legal age. In most cases, minors cannot enter into legally binding contracts because they are not old enough to be responsible for the consequences. Businesses usually may enter into legally binding contracts with people who are adults, older than the legal age, regardless of whether they are foreigners, senior citizens, or tourists. SOURCE: BL:002 SOURCE: Bovée, C. L., & Thill, J. V. (2008). Business in action (4th ed.) [pp. 381-382]. Upper Saddle River, NJ: Pearson Prentice Hall.
5. C Minimum-wage laws. By passing laws that require businesses to pay workers a minimum amount of money per hour, the government is protecting workers' rights for fair and reasonable compensation. Worker compensation is insurance purchased by employers to provide benefits to employees who are injured on the job. A labor union is a group of workers in the same industry or profession who have united to improve the terms and conditions under which they work. Labor union laws govern the way labor unions can organize and take action. Equal-credit policies are guidelines that provide all consumers with an equal opportunity to apply for credit, which allows buyers to buy now and pay later. SOURCE: BL:007 SOURCE: McAdams, T., Neslund, N., & Neslund, K. (2007). Law, business, and society (8th ed.) [pp. 459-460]. Boston: McGraw-Hill/Irwin. ENTREPRENEURSHIP 12
6. A Corporation. The corporation structure is ideal for business owners who need to raise a lot of capital. Limited liability partnerships are generally used by service professionals such as lawyers, doctors, or accountants. Although creation of a general partnership is possible in terms of securing capital, this business structure does not generally have the financial power available to a corporation. In addition, general partnerships experience unlimited liability. Financial lenders generally consider sole proprietorships high-risk investments and do not usually lend high amounts of capital to these business structures. SOURCE: BL:006 SOURCE: BL LAP 2—Taking Care of Business
7. C Sales. Sales taxes are monies charged on sales of certain goods and services by state and/or local governments. The tax amount varies by location. After the business collects the sales tax from customers for their purchases, it pays the monies to the appropriate government agency. Income taxes are monies that the business withholds from its employees' wages. Estate taxes are monies that are collected from a person's estate upon his/her death. Corporations rather than customers pay corporate taxes. SOURCE: BL:009 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (p. 381). New York: Glencoe/McGraw-Hill.
8. A Producer to wholesaler. With the producer to wholesaler channel, producers sell large quantities of goods to wholesalers who divide the goods into smaller units for sale to retailers. The producer to consumer channel moves goods straight from the producer to the consumer. The producer to retailer to consumer channel is used when it is not possible for a producer to reach a large number of consumers on a direct basis. Then, a decision must be made to distribute products through intermediaries. Producer to agent to user is a channel of distribution for industrial goods such as construction equipment and lumber. SOURCE: CM:003 SOURCE: CM LAP 1—Channel It (Channels of Distribution)
9. D Market. A business considers market factors when selecting the channel members that move the products through the distribution system. Geographic location of the producer, the wholesalers, and the end users influences how the products will move. For example, a producer that is located in a remote area may decide it would be less expensive and quicker to move products by its own trucks than by an independent trucking company. Because the end users actually consume the goods, the producer wants to make sure that the products arrive to the people who use the items on a timely basis. Product factors are the characteristics of goods or services. When the business evaluates the activities of businesses that offer similar products, it is considering competitive factors. Leadership is the ability to guide or direct the actions of others in a desired manner. SOURCE: CM:010 SOURCE: Boone, L.E., & Kurtz, D.L. (2004). Contemporary marketing (11th ed.) [pp. 440-442]. Mason, OH: Thomson/South-Western. ENTREPRENEURSHIP 13
10. B Wholly owned subsidiary. There are many ways to enter foreign markets. In the example, the business owner found an opportunity to expand by purchasing a small manufacturing plant in Thailand. By purchasing the plant, the business owner can produce goods at the plant and sell them in nearby foreign markets. The manufacturing plant is owned and controlled by the American parent company, so it is a wholly owned subsidiary. A joint venture or strategic alliance is an arrangement that involves two or more businesses entering into a short-term relationship by combining complementary resources such as technology, skills, capital, or distribution channels for the benefit of all parties. A franchise is a contractual agreement between a parent company and a franchisee (separate entity or company) to distribute the parent company's goods or services. The manufacturing company is an intermediary used to move goods and services; however, it isn't independent because it is owned by the parent company. SOURCE: EC:066 SOURCE: Hall, C.W. (2009). International business: Competing in the global marketplace (7th ed.) [ ]. New York: McGraw Hill.
11. B They are important to the economy. Small businesses account for the majority of all businesses. Therefore, they are an extremely important part of the economy. Without small businesses, the economy would not prosper and grow. Small businesses may be owned by one person or several people. SOURCE: EC:065 SOURCE: Burrow, J.L. (2002). Marketing (pp. 564-565). Mason, OH: South-Western.
12. D Commitment. Asking team members to develop team goals, mission, and values is one method for enhancing employees' commitment to the team. It helps team members understand how their work contributes to the team and overall company objectives. Communication and creativity are important components of successful teams. Conflict is a team issue that may develop and require conflict resolution measures. SOURCE: EI:044 SOURCE: Hilgert, R.R., & Leonard, E.C. (2001). Supervision: Concepts and practices of management (8th ed.) [p. 511]. Cincinnati: South-Western College Publishing.
13. C Copayment. Health insurance covers such medical expenses as hospital bills, doctors' fees, and lab charges. Employers negotiate contracts with health insurance companies to obtain favorable or discounted group rates. Depending on the terms of the contract, the employers and employees pay a portion of the health insurance premium. A copayment is a predetermined out-of-pocket expense that the insured (employee) often pays at the time of service to cover a portion of the health-care provider's fee. The balance of the health-care provider's fee is applied to the employee's annual deductible or is covered by the insurance company after the deductible has been met. A surrender charge is a fee charged to a policyholder by a life insurance company when the insurance policy or annuity is surrendered or waivered for its cash value. SOURCE: FI:081 SOURCE: Investopedia. (2012). Co-pay. Retrieved February 23, 2012, from http://www.investopedia.com/terms/c/copay.asp#axzz1nDRJFkES
14. B $6,000. In order to calculate the yearly premium, first determine the number of increments of $25,000 by dividing that figure into the total value of the property ($250,000 ÷ $25,000 = 10). Multiply the monthly rate by the number of increments to determine the monthly premium ($50 x 10 = $500). Then, multiply the monthly premium by 12 to calculate the total premium for the year ($500 x 12 = $6,000). SOURCE: FI:082 SOURCE: Business Owner's Toolkit. (1995-2011). How much insurance do you need? Retrieved November 7, 2011, from http://www.toolkit.cch.com/text/P04_8185.asp ENTREPRENEURSHIP 14
15. D How will they spend the money? Businesses that apply for credit must provide lenders with information abouthow they will spend the money. They need to explain if the money will be used to cover operating expenses,purchase new equipment, expand the facility, etc. Lenders often base their decisions about whether or not toextend credit on how the money will be used. Lenders usually do not ask questions about how many employeeswill be promoted, how former customers will be handled, or how often prices will be raised. SOURCE: FI:023 SOURCE: pp. 539-540, Retail Merchandising: Consumer Goods & Services. Samson, H.E.; Little, W.G.,South-Western Publishing Co., 11th ed., 1993.
16. C Checking accounts and loans. Banks offer a variety of services, but the two most important services to most businesses are checking accounts and loans. As a rule, businesses need checking accounts in order to pay expenses and deposit income. They also need either short-term or long-term loans on various occasions. Businesses usually obtain both services from the same bank because they develop a relationship with that bank. Money orders, credit cards, safe-deposit boxes, financial advice, certified checks, and savings accounts are other services that businesses might use; but they are not the most important because they are not used as routinely as checking accounts and loans. SOURCE: FI:039 SOURCE: Longenecker, J.G.; Moore,C.W.; Petty, J.W. (2003). Small Business Management: An Entrepreneurial Emphasis (12th ed.) [pp. 335-336]. Mason, OH: Thomson/South-Western.
17. C To increase sales. In most cases, businesses that accept bank cards generate more sales than businesses thataccept only cash. Although there are costs associated with accepting bank cards, businesses usually believethat the increase in sales will more than offset the cost. Usually, customers prefer the option of beingable to pay with a credit card and might avoid businesses that accept only cash. Therefore, the decision toaccept bank cards is important to most businesses because it frequently has an impact on the bottom line.Businesses do not accept bank cards to monitor assets or decrease financing. Accepting only cash is aneffective way to improve cash flow. SOURCE: FI:040 SOURCE: FI:040;pp. 408-409, Small Business Management: An Entrepreneurial Emphasis. Longenecker, J.G.; Moore,C.W.; Petty, J.W., Thomson/South-Western, 12th ed., 2003.
18. C Risks. Many small businesses obtain variable interest rate loans because the rates are low at the time they negotiate the loan. The risk involved with these types of loans is that the rate will increase far more than the business expects, which makes borrowing the money very expensive. It is risky to obtain variable interest rate loans unless the business negotiates a maximum cap on the rate. That way, the business knows that the interest rate will not exceed a certain number. For example, if the variable rate is currently 5%, a business might negotiate a cap of 9%. A rising interest rate is not a penalty, fee, or limit. However, there are fees associated with obtaining loans, and there may be penalties if the business pays off the loan ahead of schedule. SOURCE: FI:041 SOURCE: Business Owner's Toolkit. (n.d.). Direct financial costs. Retrieved January 21, 2009, from http://www.toolkit.cch.com/text/P10_3372.asp
19. D Has no record of repaying loans. Banks look at many factors to determine if a business is worthy of credit. Start-up businesses borrow money based on the entrepreneur's past record of loan repayment because the business is new and has no previous debt repayment record. If a business incorporates, other avenues of securing capital are available. If start-up businesses have sufficient collateral and a solid business plan, it is easier for them to obtain financing from a bank. SOURCE: FI:034 SOURCE: Greene, C.L. (2000). Entrepreneurship: Ideas in action (pp. 146-148). Cincinnati: South- Western Educational. ENTREPRENEURSHIP 15
20. B Cash flow statements. A cash flow statement is a financial summary with estimates as to when, where, and how much money will flow into and out of a business. It is one of the financial documents that banks expect a business to provide when applying for a loan. Many times, a bank will request copies of cash flow statements from previous years to determine if the business consistently has sufficient cash to cover operating expenses and repay debts, such as a new loan. If a bank wanted collateral to guarantee the loan, it might ask the business to provide equipment lists or real estate deeds. These are assets that the business might use to obtain a secured loan. Stock certificates are given to stockholders as proof that they own a share of the business. SOURCE: FI:033 SOURCE: FI:033;pp. 334-335, Small Business Management: An Entrepreneurial Emphasis. Longenecker, J.G.; Moore,C.W.; Petty, J.W., Thomson/South-Western, 12th ed., 2003.
21. D Anticipated expenses. A budget is an estimate of income and expense for a specific period of time. The purpose of a budget is to help a company and each one of its departments control spending, set goals, and prioritize activities. The person(s) who develops the budget considers many factors such as historical data—previous sales, salaries, etc.—during the same period in previous years. When developing a budget, it is important to factor in anticipated expenses such as professional development (training) and warehousing costs. Because each department has different needs and expenses, professional development and warehousing costs are not anticipated expenses for all departments. Business and departmental needs rather than personal needs are considerations when developing a budget. SOURCE: FI:099 SOURCE: Bovée, C.L., Thill, J.V., & Mescon, M.H. (2007). Excellence in business (3rd ed.) [pp. 556- 557]. Upper Saddle River, NJ: Pearson Prentice Hall.
22. B Sales force composite. There are several advantages to the sales force composite. More accurate forecasts for individual products can usually be obtained because sales personnel have first-hand knowledge about demand for certain products as a result of their constant contact with customers. It is an inexpensive method to use because it has few costs other than the time required. It also provides as much detail as the business might need because the business can forecast sales for individual products and for an overall company sales forecast. The Delphi sales-forecasting method can take a lot of time; therefore, it is expensive. The survey of buyer intentions sales forecasting method is not always accurate since customers sometimes can't make accurate predictions of their buying intentions. The jury of executive opinion sales forecasting method may be too optimistic or too conservative depending upon the executives' viewpoints. Therefore, some forecasters consider this a form of guesswork, thereby requiring the use of other forecasting methods to support it. SOURCE: FI:096 SOURCE: IM LAP 4—Forecasting Sales
23. D Federal. Businesses must collect, report, and pay to the appropriate government a variety of taxes. Excise taxes are a type of sales tax on selected products and are paid to the federal government. General sales taxes are paid to city, county, and/or state governments. SOURCE: FI:090 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [p. 181]. Cincinnati: South-Western. ENTREPRENEURSHIP 16
24. B $2,975. The amounts a business owes its suppliers in the near future, such as 30 or 60 days, are purchases made on account, or accounts payable. Businesses can reduce the amount of cash outflow by increasing their accounts payable. Businesses will have more cash available for other uses if they do not need to pay cash for all their purchases. In this example, the business makes 65% of its purchases on account. To calculate the amount of cash purchases, first determine the accounts payable by multiplying the purchases by 65% ($8,500 x 65% or .65 = $5,525). Then, subtract the accounts payable from total purchases to calculate cash purchases ($8,500 - $5,525 = $2,975). SOURCE: FI:100 SOURCE: CCH Inc. (n.d.). Analyzing your cash flow. Business Owner's Toolkit. Retrieved October 30, 2008, from http://www.toolkit.cch.com/text/P06_4200.asp
25. D 12. If ABC Company has 1,000 clients who each must be called on once a month, multiply the number of clients by the number of months in a year to determine the total number of yearly sales calls (1,000 X 12 = 12,000). If the average sales representative can make 1,000 calls per year, divide the yearly number of calls by 1,000 to determine the number of sales representatives needed (12,000 ÷ 1,000 = 12). SOURCE: HR:353 SOURCE: Hair, J.F., Anderson, R.E., Mehta, R., & Babin, B.J. (2009). Sales management: Building customer relationships and partnerships (pp. 197-198). Boston: Houghton Mifflin Company.
26. B Have the desired skills to perform a specific job. It isn't feasible for businesses to interview every person who submits a résumé for a job opening. Therefore, businesses screen résumés, which is the process of reviewing résumés to determine which candidates have the qualifications to perform the job. For example, if a job requires a worker to type 50 words a minute, and the applicant's résumé indicates that s/he types 70 words a minute, then the applicant would meet the business's criteria for performing one aspect of the job at an efficient level. A résumé is a document and doesn't adequately provide insight or enough information about the applicant's ability to improve a skill, his/her ethics, organizational skills, and efficiency levels. SOURCE: HR:354 SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10th ed.) [pp. 242-243, 246]. Cincinnati: Thomson/South-Western.
27. D To determine qualifications. One of the purposes of the interview process is to determine if job applicants have the qualifications to perform the specific job. To determine this, it is important to ask job applicants about their training and previous job responsibilities. This information will indicate their work experience and education background. Businesses often contact references to verify recommendations. Businesses do not ask job applicants about their training and previous job responsibilities to analyze personality types or to establish specifications. SOURCE: HR:355 SOURCE: Kimbrell, G., & Vineyard, B. (2006). Succeeding in the world of work (pp. 138-142). Woodland Hills, CA: Glencoe-McGraw-Hill.
28. A Benefit package. Employee compensation includes a combination of pay and benefits. The benefit package is important because it amounts to about one-third of total compensation. Businesses need to consider the cost of the benefit package when developing staffing needs. For example, if an employee is paid $30,000 a year, the benefit package costs the business about $10,000 a year for a total of $40,000. There is a big difference between $30,000 and $40,000 when preparing a budget. Wage garnishment, intangible reward system, and discount rate are not important parts of employee compensation. SOURCE: HR:390 SOURCE: DuBrin, A.J. (2003). Essentials of management (6th ed.) [pp. 277-279]. Mason, OH: South- Western. ENTREPRENEURSHIP 17
29. D To refuse to hire John because a female is needed to model swimsuits. In this situation, sex discriminationis legal because sex is a bona fide occupational qualification. Sex discrimination, otherwise, is not legal.An employer could not discriminate against Juan on the basis of national originþCivil Rights Act. Anemployer could not refuse to hire Marie on the basis of having two small childrenþPregnancy DiscriminationAct. Finally, an employer could not refuse to hire Louis because of an arrest record unless the arrests weredirectly related to job performanceþEqual Employment Opportunity Act. SOURCE: HR:356 SOURCE: Dessler, G. (2000). Human Resource Management (8th ed) [p. 55]. Prentice Hall.
30. C Cross-training employees to perform several different jobs. Cross-training allows management to reassign people working on less essential tasks to assist temporarily at high points of demand. Hiring new employees has high recruitment and training costs, plus it can result in overstaffing when demand returns to normal. Increasing work hours means paying overtime and can also adversely affect employees' productivity. Customers don't like irritable and overworked service providers. Using temporaries isn't as costly as hiring new employees, but they would lack the training of regular employees; therefore, they would not provide the same level of service. SOURCE: HR:497 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 226). Woodland Hills, CA: Glencoe/McGraw-Hill.
31. B Internal recruiting. Internal recruitment involves seeking workers from within the business. External recruiting is seeking workers from outside the business. Employee turnover is the rate at which employees are hired or leave the organization. Group incentives reward employees for cooperative efforts. SOURCE: HR:498 SOURCE: MN LAP 52—Recruiting New Employees
32. A Company policies and regulations. A new employee must understand these so s/he can act appropriately within the organization. Employee qualifications are addressed before a decision to hire can be made. The remaining alternatives are training methods. SOURCE: HR:361 SOURCE: MN LAP 44—Orienting New Employees
33. A Following up. Coaching employees to help them improve their performance is an ongoing process. Therefore, it is important to follow up with employees to make sure they understand the suggestions for improvement and are doing what is expected. If they still are not performing as desired, additional coaching may be necessary. However, businesses will not know this if they do not follow up with employees. Coaching does not involve socializing, bargaining, or negotiating with employees. SOURCE: HR:364 SOURCE: Lussier, R.N. (2003). Management fundamentals: Concepts, applications, skill development (2nd ed.) [pp. 448-449]. Mason, OH: South-Western. ENTREPRENEURSHIP 18
34. C Appreciation. Volunteers are individuals who perform tasks related to an event and are not paid for the work. Many sport/event organizations rely on volunteers to keep an event running smoothly. For example, a golf tournament might recruit many volunteers to run concessions and help with other tournament activities. To build a good relationship with the volunteers and encourage them to volunteer in the future, event organizers try to show their appreciation and recognize the volunteers' efforts by holding parties, giving them keepsake gifts, and providing free admission to event activities. Creativity refers to the ability to generate new ideas. Wealth refers to money. Indifference is an attitude of not caring about something one way or another. SOURCE: HR:365 SOURCE: Supovitz, F. (2005). The sports event management and marketing playbook (p. 408). New York: John Wiley & Sons.
35. C Sell eagerly with authority and professionalism. Salespeople should take their jobs seriously. Not performing well could mean the loss of a job. Customers may resent having to ask for help or helping themselves. Sales quotas are worthwhile goals but should not be the sole motivation for good sellingefforts. SOURCE: HR:368 SOURCE: MN:021
36. C Yes, employees should be involved. Since employees are usually well aware of anything that is unfair in the workplace, they should be encouraged to make suggestions for improvement. Including employees should help to solve problems rather than create them. Equity is not solely management's responsibility. Involving employees is not a legal requirement. SOURCE: HR:367 SOURCE: MN LAP 55—Managing Diversity in the Workplace
37. D Corrective counseling. Corrective counseling is a form of corrective discipline which requires the employee to discuss violations with a personnel counselor and to discuss repeated violations with successively higher levels of management. Corrective counseling is intended to be positive and fact- finding with regard to employee behavior. By guiding employees toward acceptable workplace behavior, rather than penalizing their behavior, supervisors can preserve employees' dignity. Personal training, basic conditioning, and educational planning are not techniques that a supervisor might use with employees who are violating company rules. SOURCE: HR:369 SOURCE: MN LAP 53—Remedial Action
38. B $336. In order to calculate Emily's net pay, add together the deductions ($65 + $32 + $12 = $109). Subtract the total deductions from gross pay to determine net pay ($445 - $109 = $336). SOURCE: HR:352 SOURCE: pp. 120-121, Working: Skills for a New Age. Bailey, L., Delmar Publishers Inc., 1990. ENTREPRENEURSHIP 19
39. A To reduce wasted marketing efforts. Many Internet surfers access web sites that display goods or services that do not fit their needs. Sometimes, web users sign up for a product or service and do not need it after a period of time. Without strategies in place to maintain a business's database, the information system can grow out of control. As a result, promotional information, e-mail marketing messages, and newsletters are often sent to people who are not going to purchase goods or services. This is a waste of time in terms of money and personnel. Therefore, many companies try to update their databases regularly so information is sent to those who are potential or existing customers. One means of maintaining a database is providing web users an opt-out link to discontinue receiving unwanted information from the company. Maintaining a database does not necessarily lead a company to increase its promotional budget nor does it accelerate a web-site's download time. Internet service providers are companies that provide access to the Internet. Fees are not necessarily reduced when companies update their databases. SOURCE: IM:231 SOURCE: Business Link. (n.d.). Manage your customer database. Retrieved November 9, 2011, from http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792534&type=RESOURCES
40. D Customer satisfaction. Accounts receivable records often include a variety of information such as the types of products that customers returned and the reasons for the returns. This information provides businesses with an overview of customers' satisfaction with the business and its products. For example, if the accounts receivable records indicate that large quantities of one type of product were returned, the business knows that its customers are not satisfied with that product. The business then can take action to correct the problem in order to avoid losing customers. Sales invoices contain product description information. Sales reports contain information about sales territories. Accounts receivable records do not contain promotional history information. SOURCE: IM:186 SOURCE: Hair, J.F., Jr., Bush, R.P., & Ortinau, D.J. (2000). Marketing research: A practical approach for the new millennium ( ). Boston: Irwin/McGraw-Hill.
41. A Training required to use new equipment. A business's personnel policies often have a significant impact on employees' quality of life on the job. Policies that are fair, easy to understand, and equally applied tend to improve the quality of life on the job because employees feel that the business is looking out for their best interests. An example is a policy that requires training to use new equipment. Such a policy reduces the possibility of accidents and increases safety because employees are taught the correct way to use equipment. This type of policy makes the work environment less hazardous and improves the quality of life onthe job. Some personnel policies have a negative effect on employees' work experiences because they are not fair. Examples include allowing immediate supervisors to decide promotions without input from others, making benefit programs available only to management, or permitting supervisors to schedule employees on a random basis rather than by using an established procedure. SOURCE: MN:039 SOURCE: Jackson, S., & Schuler, R. (2003). Managing human resources through strategic partnerships (8th ed.) [pp. 596-598]. Cincinnati: Thomson/South-Western.
42. A Spend more time doing management work. Giving employees responsibility is an example of delegation, which is a management activity. Managers usually delegate certain routine jobs to employees so the managers can spend more time doing the type of work that managers are expected to perform. For example, managers plan and direct the business's activities in order to accomplish the business's goals and objectives. They cannot perform every task that is involved in the operation of the business. Giving employees responsibility for the day-to-day activities frees up managers to focus on building the business. Managers do not delegate responsibility for routine jobs so they can decide which employees to promote, blame others if mistakes are made, or avoid performing unpleasant assignments. SOURCE: MN:119 SOURCE: DuBrin, A.J. (2003). Essentials of management (6th ed.) [pp. 233-234]. Mason, OH: South- Western. ENTREPRENEURSHIP 20
43. C Role-playing. Role-playing is the process of assuming roles and acting through a given situation. It is used in many different kinds of employee training programs. Case studies are an instructional method that involves giving trainees a written description of an organizational problem, and the trainees are asked to determine the problem and potential solutions. Brainstorming is a creative thinking technique involving the identification of as many different ideas as possible during a certain time frame. It can be done by one person but is used most often in a group setting. Programmed instruction is a training method that presents material in small units that are followed by examinations to determine trainees' knowledge gain. SOURCE: MN:020 SOURCE: Jackson, S., & Schuler, R. (2003). Managing human resources through strategic partnerships (8th ed.) [p. 379]. Cincinnati: Thomson/South-Western.
44. B Motivation. Motivation is a person's desire to perform effectively and achieve goals. When managers provide useful feedback to employees about their job performance, the employees' motivation often increases because they know what is expected of them. Constructive feedback also gives employees suggestions as to how to improve their performance and do their job better. Furthermore, positive feedback often includes praise and thanks for a job well done, which is additional motivation for employees to do their best. Providing useful, constructive feedback does not increase employees' compensation. Employees usually receive feedback during an evaluation. Orientation takes place when employees begin a new job. SOURCE: MN:130 SOURCE: DuBrin, A.J. (2003). Essentials of management (6th ed.) [pp. 203-204]. Thomson/South- Western.
45. B Frequent tardiness. Frequent tardiness is an indication of low morale. If employees have difficulty motivating themselves to get to work on time, they may be unhappy with their jobs or with the work environment. They may feel that they are not a part of the team or that their jobs are insignificant. When employees are frequently tardy, businesses should try to find out why and make changes in order to raise the level of morale. Occasional accidents are inevitable and are not an indication of low morale. Limited turnover usually indicates that employees are satisfied and morale is high. Low productivity, rather than average productivity, might indicate that morale is also low. SOURCE: MN:155 SOURCE: Daft, R.L., & Marcic, D. (2001). Understanding management (3rd ed.) [pp. 479, 484]. Cincinnati: Thomson/South-Western.
46. D Coin laundry trade association. A trade association is a group of persons in the same industry or geographic area who form a society to solve their common problems. Trade associations can often provide entrepreneurs with information about average start-up and operating costs in their industry, as well as trend analyses and technology news. The Service Corps of Retired Executives (SCORE), a local chamber of commerce, and the Small Business Administration are also good sources of business start- up information, but they are unlikely to be able to provide information about start-up and operating costs for a specific industry. SOURCE: MN:187 SOURCE: Meyer, E.C., & Allen, K.R. (2006). Entrepreneurship and small business management (pp. 107-109). New York: Glencoe/McGraw-Hill.
47. C Workers buying lunch at a local restaurant. The consumer market is composed of customers who purchase goods or services to satisfy their personal desires. The other alternatives are examples of the industrial market that purchases items for use in the operation of a business, for resale, or for making other goods. SOURCE: MP:003 SOURCE: IM LAP 9—Have We Met? (Market Identification) ENTREPRENEURSHIP 21
48. C Have different needs and wants. Successful businesses understand that it is often easier and more cost effective to develop strategies that appeal to a portion of the market rather than the whole market. This is because consumers are unique and have different needs and wants. For example, some consumers want high-quality goods and service, while others are less concerned with quality and want low prices. By dividing the market into segments, a business can determine which segments are more likely to buy its products. Then, the business can develop a plan of action to target the market that has similar needs and wants. The business's goal is to develop a loyal customer following and create brand insistence by appealing to the market that is most likely to purchase its products. SOURCE: MP:004 SOURCE: Kotler, P., & Armstrong G. (2008). Principles of marketing (12th ed.) [pp. 184-185]. Upper Saddle River, NJ: Prentice-Hall.
49. A Accessible. So that a business can promote and sell products, it must be able to reach its target market, so the market must be accessible. Undifferentiated refers to a marketing strategy in which a business offers one option to the entire segment without considering market segments' differences. Concentrated refers to a tactic in which a business appeals to one or a few small markets with the goal of developing and maintaining customer loyalty. Inflexible means unwilling to adapt, and is not usually a characteristic of a desirable target market. SOURCE: MP:005 SOURCE: Kotler, P., & Armstrong, G. (2008). Principles of marketing (12th ed.) [p. 194]. Upper Saddle River, NJ: Prentice-Hall.
50. D Opportunities. Businesses conduct situational analyses to obtain information about possible threats in the environment or marketplace. This procedure allows businesses to identify threats at an early stage and take steps to turn them into opportunities, which are favorable situations in the environment surrounding the business. For example, a threat might be a slowdown in the economy that a business might turn into an opportunity by lowering prices to remain competitive. Without this information, businesses may be unprepared to deal with threats that might cause them to fail. Strengths are any resource or capability the business has that can help it to gain a competitive advantage in the industry. A procedure is a step-by- step process personnel follow in performing a specific task. Activities are actions. SOURCE: MP:008 SOURCE: Zikmund, W., & d'Amico, M. (2001). Marketing: Creating and keeping customers in an e- commerce world (7th ed.) [pp. 41-42]. Mason, OH: South-Western.
51. D Area's market potential. A market analysis is a study of a particular market segment. The purpose of the market analysis is to determine the level at which the market segment is willing and able to buy the business's products. One aspect of the market analysis addresses the area market potential, which is the number of potential customers and the potential sales volume for a specific area, territory, or location. Psychographics are lifestyle and personality considerations of a market segment. Competitors are the business's rivals. Media exposure refers to the amount of contact the business makes with the target market through the media (e.g., television, radio). Psychographics, competitors, and media exposure are other important considerations when evaluating the overall market potential of a market segment. SOURCE: MP:009 SOURCE: Kotler, P., & Lane, K. (2006). Marketing management (12th ed.) [pp. 130-131]. Upper Saddle River, NJ: Prentice Hall.
52. A One-on-one. One-on-one SWOT interviews work best because you can give the interviewee your full attention. People will also feel more free to share information if they don't have to do so in front of a small or large group. In-person interviews are always more effective than telephone interviews. SOURCE: MP:010 SOURCE: MP LAP 4—Analyze This! (SWOT Analysis) ENTREPRENEURSHIP 22
53. A State what the business hopes to achieve. Clear marketing goals and objectives state what the business hopes to achieve. If businesses do not know what they want to achieve, they cannot develop marketing strategies, which are the plans of action for achieving those goals and objectives. For example, by setting a goal of increasing sales by 5% next year, a business can focus on doing what is necessary to accomplish that goal. Businesses do not set clear marketing goals and objectives to decide the amount of profit to forecast or to find out how to appeal to the right customer base. One aspect of an effective marketing goal is establishing a time frame to achieve the goal. SOURCE: MP:015 SOURCE: Boone, L.E., & Kurtz, D.L. (2004). Contemporary marketing (11th ed.) [p. 42]. Mason, OH: Thomson/South-Western.
54. B Task. A budget is an estimate of income and expenses for a specific period of time. Task budgeting bases a budget on the projects, activities, or tasks that will best help the business meet its marketing objectives. A business that uses the task-budgeting method often obtains financial data (e.g., quotes from vendors) to determine how much an activity will cost. Then, the business can prioritize the marketing activities in a way that best uses the available funds to accomplish its marketing objectives. When a business considers the sales dollars generated during the previous year to determine the budget, it is using the percentage-of-sales budgeting method. Some businesses develop their budgets by considering factors such as sales history and the performance levels of previous marketing activities. A rolling (continuous) budget replaces each passing month with a new month added to the end of the budget, so a yearlong budget is always in place. SOURCE: MP:017 SOURCE: Perreault, W. D., Cannon, J. P., & McCarthy, E. J. (2008). Basic marketing: A marketing strategy planning approach (16th ed.) [pp. 390-391]. Boston: McGraw-Hill/Irwin.
55. B Provides guidelines for personnel to meet the company's objectives. A marketing plan is a set of procedures or strategies designed to attract target customers to a business. A comprehensive marketing plan identifies the specific actions and activities that a company will use to attract its target customers. Therefore, the marketing plan provides guidance for employees who are carrying out the marketing activities. Because internal and external factors change, a marketing plan does not reduce the need for a business to develop corrective action or contingency plans, nor does it increase its financial security. Marketing plans contain both short-term and long-term goals. SOURCE: MP:018 SOURCE: Boone, L.E., & Kurtz, D.L. (2002). Contemporary marketing (p. 202). Mason, OH: South- Western.
56. B Objectives. Objectives are goals that a business seeks to reach with its marketing plan. Businesses evaluate the performance of their marketing plans by comparing the results with the original objectives. A business would consider its marketing plan to be successful if its performance meets or exceeds the objectives. If the objectives were not met, a business would take corrective measures to solve the problem. Marketing strategies are plans of action for achieving marketing goals. Priorities are the order of importance of your activities. Alternatives are other options or ways of accomplishing tasks. SOURCE: MP:022 SOURCE: Churchill, G.A., Jr., & Peter, J.P. (1998). Marketing: Creating value for customers (2nd ed.) [pp. 543-545]. Boston: Irwin/McGraw-Hill.
57. C Storing. By saving her client information, Selina is storing it for future use. Destroying records is getting rid of them, not saving them. Creating records is putting them together initially. And, retrieving (pulling) records happens after information is stored (or held) somewhere. SOURCE: NF:001 SOURCE: NF LAP 1—Record It (Business Records) ENTREPRENEURSHIP 23
58. D Hazardous conditions. Safety policies are the business's rules or guidelines for keeping employees free from danger, risk, or injury. The purpose of safety policies is to protect employees from hazardous conditions, which are circumstances that have the potential to cause bodily harm. An example of a safety policy is requiring employees to wear protective clothing, gloves, or headgear when operating dangerous equipment. The purpose of safety policies is not to protect employees from workplace conflicts (disagreements) or negative feedback (evaluative information). Unusual circumstances are not always dangerous. SOURCE: OP:012 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 406-410). Tinley Park, IL: Goodheart-Willcox.
59. D Employing technology that prevents the free copying of digital movies. Pirating is the act of stealing a person's copyrighted materials, including movies. To prevent this from happening, the movie industry has started to use technology that makes it impossible for people to make copies of digital recordings. Because the movie industry stands to lose billions of dollars in lost revenues from pirating, it doesn't grant permission for viewers to make copies of digital movies. This is especially true when the copy is for nonpersonal use (e.g., making a copy of a movie for a friend). The sale of DVDs is a huge source of revenue once a movie leaves theaters; however, that is not a replacement for legal ownership of a DVD. Pirating is already illegal, which means that the movie industry does not need to slow down the release of DVDs. SOURCE: OP:105 SOURCE: RICN. (2001, September 10). Brave new battleground. Retrieved January 11, 2007, from http://eng.ricn.ru/press/material/53/
60. A Attending trade shows. Trade shows are organized by groups of vendors and regularly held in major cities throughout the world. Businesses often attend trade fairs to identify new sources of vendors and to identify new goods and services. Trade shows give vendors an opportunity to showcase their unique products and to encourage businesses to buy from them. Once businesses have identified new vendors that might include the actual producers of the goods or intermediaries, they might contact the producers directly or visit the intermediaries to obtain additional information. Competitors are not likely to reveal new sources of vendors when contacted. Businesses do not identify new vendors by reading their own in- house brochures or by organizing a product list. SOURCE: OP:242 SOURCE: Boone, G., & Kurtz, D.L. (2009). Contemporary marketing 2009 (p. 589). Mason, OH: South- Western Cengage Learning.
61. A Legal contract. A purchase order is a form identifying the prices, discounts, dating, transportation, charges, etc., applicable to an order issued by a buyer to a seller. Once the order is signed and accepted by a vendor, it is a legal contract. Therefore, a business must fill out all the information correctly because the agreement is enforceable by law. If a business makes an error, such as listing a higher purchase price, the vendor has the right to charge that price. A purchase order is not a receiving document, a delivery form, or a payment record. SOURCE: OP:016 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2009). Marketing essentials (pp. 348-349). Woodland Hills, CA: Glencoe/McGraw-Hill. ENTREPRENEURSHIP 24
62. B Set goals. Most businesses have expectations of producing a certain quality of product or providing a certain quality of service. To help employees achieve the expectations of quality, management should set goals (the objectives the business wants to achieve) and make sure that employees understand the goals. If the business does not set goals for quality and explain them to employees, there is no way for employees to know what the business expects. Setting clear goals will help employees achieve them. Offering incentives and paying bonuses might encourage employees to work hard to achieve the business's expectations of quality, once they know what those expectations are. Cutting costs will not necessarily help employees achieve the business's expectations of quality. In fact, cutting costs may make it more difficult to achieve quality. SOURCE: OP:020 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 282-283). New York: Glencoe/McGraw-Hill.
63. A To monitor financial status. Businesses maintain accurate accounting records in order to keep track of how they are doing financially. The accounting records provide businesses with such important information as the amount of operating expenses, what their sales revenues are, and whether the businesses are earning profits. Businesses do not maintain accounting records in order to prepare purchase orders, review employee performance, or develop inventory control. SOURCE: OP:024 SOURCE: MN LAP 57—Operating Expenses
64. D To determine the optimal selling price for a good or service. A break-even analysis is an assessment that identifies various levels of sales that a business needs to achieve to reach the break-even point at various prices. The break-even point is the level of sales at which revenues equal total costs. By examining the various sales levels in relation to their break-even points, the business can determine the optimal selling price for a particular good or service. When a business obtains and analyzes information about its competitors, it is conducting a competitive analysis. A business reviews its income statement to evaluate its income in relation to its expenses. The business obtains information from the government to ensure that it is complying with regulations. SOURCE: OP:192 SOURCE: Bovée, C. L., & Thill, J. V. (2008). Business in action (4th ed.) [pp. 257-258]. Upper Saddle River, NJ: Pearson Prentice Hall.
65. C Hiring an outside payroll processing company. Finding ways to control expenses is important to businesses. Some small businesses that prepare their own payrolls may forget to deposit the withheld payroll taxes on time and be charged a costly penalty by the Internal Revenue Service. If this situation occurs frequently, a small business may end up paying a significant amount in penalties. One way to eliminate the problem and control expenses is to hire an outside payroll processing company which will prepare all the federal and state payroll tax deposits and make sure the business pays them on time. The cost of hiring an outside payroll processing company is less than continually paying costly penalties to the IRS. Preparing payroll expenses, creating a budget plan of equal payments, and making balloon payments will not help to control a business's expenses if it frequently pays costly penalties to the IRS. SOURCE: OP:029 SOURCE: Meyer, E.C., & Allen, K.R. (2006). Entrepreneurship and small business management (p. 169). New York: Glencoe/McGraw-Hill. ENTREPRENEURSHIP 25
66. D Financial and problem-solving. Entrepreneurs need to understand financial or money concepts and how the concepts relate to their businesses. This understanding helps business owners maintain and control business operations and other expenses. Control over expenses can increase the company's profitability. Problem-solving skills can help an entrepreneur protect company profitability by finding new ways or solutions to overcome obstacles, which may affect revenue. Passive is defined as dormant or not active. Skills are learned and practiced and, therefore, cannot be passive. Operations is a business function rather than a skill. Possession of domestic skills (e.g., cooking) does not generally protect a company's profitability. Technical skills are specialized applications used to accomplish business objectives. Language skills refers to the degree a person can communicate with others in a verbal or written manner. Team building refers to the manner in which a person interacts in a group of people to accomplish a goal. Although entrepreneurs can use technical, language, and team-building skills to increase or maintain corporate profitability, they must possess a fiscally responsible mindset. SOURCE: PD:066 SOURCE: PD LAP 4—Own Your Own (Career Opportunities in Entrepreneurship)
67. B Creates customer convenience. E-commerce is the buying and selling of goods and services over the Internet. One of the characteristics of e-commerce is that it creates customer convenience because it is possible for customers to shop online at any time of the day or night. People are able to access the web sites of many businesses to view products, obtain pricing, ask questions, place orders, etc. This is convenient for many customers and often encourages them to buy from businesses that offer this option. Businesses that sell online use some type of shopping software. E-commerce exists as a result of computer networking. E-commerce does not arrange electronic communication. SOURCE: PD:119 SOURCE: Miles, J.E., & Dolce, C. (2006). E-commerce (p. 19). New York: Glencoe/McGraw-Hill.
68. B Economic growth. In times of economic growth, both individuals and business increase their spending, which increases demand. When demand is higher than producers can meet, prices go up. During times of economic growth, people have more money to spend and are willing to pay higher prices to purchase the goods and services that they want and need. As a result, the selling price often increases. High unemployment, inelastic demand, and an abundant supply are factors that often cause a decrease in the selling price of goods and services. SOURCE: PI:002 SOURCE: Soloman, M. R., Marshall, G. W., & Stuart, E. W. (2008). Marketing: Real people, real choices (5th ed.) [pp. 350-351]. Upper Saddle River, NJ: Pearson Prentice Hall.
69. D $1.33. To calculate the variable cost per unit, first divide total sales revenue by the rental price per two- day period to determine the number of rental periods ($95,200 ÷ $4.00 = $23,800). Divide total variable costs by the number of rental periods to determine variable cost per unit ($31,500 ÷ $23,800 = $1.33). SOURCE: PI:006 SOURCE: PI LAP 4—Tipping Point (Calculate Break-Even)
70. C $25.49. Calculate the reduced selling price in the following manner. First, convert the markdown percentage into a decimal by moving the decimal point two places to the left and dropping the percent sign (15% = .15). Then, multiply the selling price by the markdown rate to obtain the dollar markdown amount ($29.99 x .15 = $4.4985, rounded up to $4.50). Subtract the markdown amount from the regular selling price to determine the reduced selling price ($29.99 - $4.50 = $25.49). SOURCE: PI:008 SOURCE: Stull, W.A. (1999). Marketing and essential math skills: Teacher's edition (p. 108). Cincinnati: South-Western Educational. ENTREPRENEURSHIP 26
71. A Transportation charges. The final cost of a product to a company includes all the expenses involved inbuying or producing the goods. One of these expenses is transportation charges paid by the buyer which mayinvolve the shipment of raw materials to make a product, or moving the final product to market. Operatingexpenses are expenditures necessary to keep the business running. Current liabilities are debts that thebusiness owes. Accounts payable are all monies owed by the business to others. SOURCE: PI:019 SOURCE: PI:019;p. 313, Retail Buying: From Staples to Fashions to Fads. Clodfelter, R., Delmar PublishersInc., 1993.
72. A Competitors' prices. The cost-based method for setting base price considers the costs involved in producing and marketing a product. This method does not take into consideration the prices that competitors are charging for similar products. A business using the cost-based method may set a price that is higher than a competitor's price. As a result, the product may not sell because customers can purchase the same item for a lower price from a competitor. Businesses using the cost-based method for setting price take into consideration marketing charges, production costs, and operating expenses. SOURCE: PI:018 SOURCE: PI:018;p. 320, Marketing: Creating Value for Customers. Churchill, G.A.; Peter, J.P., Irwin/McGraw-Hill, 2nd ed., 1998.
73. C Research and development. Many large businesses have research and development departments that are responsible for generating ideas for new products. These departments conduct research, analyze information, and review new technology to generate ideas. They often begin with a problem or an issue, and generate ideas to solve the problem or address the issue. The sole function of these departments is to develop new products or update existing products. Information technology deals with the sharing of information. Executive management is responsible for the overall operation of the business. Sales and marketing is responsible for selling the product. SOURCE: PM:128 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2010). Marketing dynamics: Teacher's edition (2nd ed.) [p. 279]. Tinley Park, IL: Goodheart-Willcox Company, Inc.
74. A Will this product meet a specific need in the marketplace? If the product isn't needed, it won't sell. In that case, there is no need to evaluate other decisions, such as obtaining the product from vendors at a good price, hiring additional staff, or distributing the product in foreign markets. SOURCE: PM:129 SOURCE: Mississippi State University Extension Service. (n.d.). Exploring the potential for new food products. Retrieved March 11, 2009, from http://msucares.com/pubs/publications/p2170.pdf
75. D Repeat sales. Companies evaluate their customers' experiences to determine how well they are satisfying their customers' needs and wants. If a company is not providing the customers with positive experiences, the business can take corrective action. If a company is providing its customers with positive experiences, the customers are more likely to buy again from the company. When customers buy from the same business again, it is called repeat sales. A company that is providing positive customer experiences will be likely to receive favorable rather unfavorable publicity. Advertising is a promotional media for which a business pays. Sales quotas are specific sales goals. SOURCE: PM:138 SOURCE: Armstrong, G., & Kotler, P. (2000). Marketing: An introduction (5th ed.) [pp. 8-9]. Upper Saddle River, NJ: Prentice Hall. ENTREPRENEURSHIP 27
76. A Cheeseburgers. A product item is an individual good, service, or idea that a business offers for sale. Product items are distinguished by size, style, price, or any feature that makes one item different from another. Men's apparel, frozen foods, and health and beauty aids are examples of product lines, which are groups of closely related products. SOURCE: PM:003 SOURCE: PM LAP 3: Mix & Match (Nature of Product Mix)
77. A Monitor trends. A trend is the general direction in which people or events are moving. As people and conditions change, a target market's wants and needs tend to change, which often results in a market's desire for new products. One way to identify the products that a market segment might want is to monitor trends. Forecasting sales, improving quality, and reviewing budgets do not always indicate what types of products a target market may want in the future. SOURCE: PM:130 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 308-309). Tinley Park, IL: Goodheart-Willcox.
78. D Quality. Product mix is the particular assortment of goods and services that a business offers. The product line is a group of related items in the product mix. A factor that the ABX Corporation needs to consider is the quality of the products that it plans to carry. The quality is the excellence of the item. Products made of stronger and more expensive materials are often more durable than those made from lighter, cheaper materials. Therefore, the quality is an important factor when considering product mix. Reach is the quantitative measure of the number of different people in the target audience who are exposed at least once to an advertising message. Products themselves do not have objectives or resources; people have objectives or resources. SOURCE: PM:006 SOURCE: Burrow, J. (2006). Marketing (2nd ed.) [p. 269]. Mason, OH: South-Western.
79. B To keep visitors returning. Websites are maintained to avoid problems that are bad for business. One of these problems might involve visitors not returning because the content is not fresh or the graphics on a page do not load quickly enough. Regular website maintenance keeps a site up and running smoothly, creates positive feelings toward the business, and keeps visitors returning. Maintenance does not involve guaranteeing privacy. Organizing a site map might be an action taken when updating sites, but it does not indicate the importance of maintaining websites. The purpose of regular maintenance is to make sure all links are working properly rather than to eliminate links unless the linked sites are no longer operational. SOURCE: PM:113 SOURCE: PM LAP 9—WWW Site Maintenance
80. C Service. Luxury car dealers, such as Lexus, often provide their customers with free transportation while their cars are being serviced. However, most mid-priced car dealerships do not usually provide free transportation. A mid-priced car dealer that offers a service that its competitors do not, is setting itself apart in terms of the level of service that it provides. Free transportation does not necessarily emphasize safety, loyalty, or performance. SOURCE: PM:042 SOURCE: Soloman, M. R., Marshall, G. W., & Stuart, E. W. (2008). Marketing: Real people, real choices (5th ed.) [pp. 322-323]. Upper Saddle River, NJ: Pearson Prentice Hall. ENTREPRENEURSHIP 28
81. D Short and memorable. Generally, a brand name should be easy for the consumer to say and to remember. It should also say something about the product and should be adaptable for many uses, including packaging, signage, and advertising. But there are notable exceptions. Some brand names have broken the "short and memorable" rule and have long, multisyllabic names. But these are few and far between. Names that are intentionally "flashy" often miss the mark and fail because they do not represent the product in a meaningful way. Brand names do not have to be related to other brands. When appropriate and possible, brand names should relate to product features; however, there are exceptions to the rule. SOURCE: PM:021 SOURCE: PM LAP 6—It's a Brand, Brand, Brand World (The Nature of Branding)
82. D The product's attributes. Product positioning is a product-mix strategy in which a business creates a certain image or impression of a product in the minds of consumers. A business uses specific strategies to achieve the image it desires to create. When a business emphasizes specific characteristics (e.g., color, size, efficiency level) of the product to set it apart from the competition, it is positioning the product by its attributes. Value pricing is a product-mix strategy that emphasizes a specific product benefit—low price. Focusing on an aspect of a competitor's product is positioning a product against the competition. Customization is a production method in which a business produces a good or service according to the customer's specific needs. Customization is an attribute that a business might use to position its product, but this is not always the case. SOURCE: PM:043 SOURCE: Boone, L.E., & Kurtz, D.L. (2004). Contemporary marketing (11th ed.) [pp. 245-246]. Mason, OH: Thomson/South-Western.
83. D Business plan. Developing a successful brand depends on clearly identifying and defining the business's strengths and competitive advantages. It is often helpful for business owners to go back and review (or write, if they don't exist) their business plans to glean this information. Press releases may describe the business's strengths, and as representations of the brand, a business's name and slogan may imply its strengths or competitive edge. Although some businesses allude to their strengths and competitive advantages on the Internet, they would not use their FAQs to address these issues. SOURCE: PM:126 SOURCE: PM LAP 10—Build Your Corporate Brand...Before Someone Builds It for You (Corporate Branding)
84. B The dependability of the supplier. The supplier's reputation for delivering the goods that were ordered at the time promised is a very important factor. The restaurant will suffer if the supplier is not dependable. The supplier's market share, or portion of the industry market, would not be a consideration for the restaurant. The restaurant's operating expenses are the costs of running the business and do not include cost of goods. Tying agreements that require the purchase of certain goods in order to get others are illegal. SOURCE: PM:263 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2003). Small business management: An entrepreneurial emphasis (12th ed.) [pp. 512-513]. Cincinnati: Thomson/South-Western.
85. B Discounts. When auto-parts stores negotiate terms with vendors, the stores are negotiating discounts that the vendor will give the stores. There are several types of discounts such as cash, trade, promotional, seasonal, etc. Stores negotiate discounts in order to pay the lowest amount possible for the items they order. Vendors offer discounts to encourage stores to buy from them rather than from other vendors. Stores may negotiate shipping costs with a vendor but those costs are not known as terms. Markdowns are reductions in the selling price that stores offer to customers. Terms are not credit options. SOURCE: PM:264 SOURCE: Stull, W.A. (1999). Marketing and essential math skills: Teacher's edition (pp. 78-84). Cincinnati: South-Western Educational. ENTREPRENEURSHIP 29
86. C Product. The specific goal of product promotion is to persuade consumers to buy a particular good orservice. This is often done by providing a coupon to a consumer as an incentive for the purchase. Public relations and corporate promotion are forms of institutional promotion that focus on creating a certain image for the company rather than attempting to sell a good or service. Place promotion is a function of marketing and does not involve the use of coupons as a promotional tool. SOURCE: PR:002 SOURCE: PR LAP 4—Know Your Options (Types of Promotion)
87. D Newspapers. Most newspapers are printed on a daily or weekly basis. They provide a way for businesses to reach consumers with a message at the time when it will be most effective. Most magazine and directory advertisements must be prepared well in advance. Outdoor media are not timely because the cost and effort needed to change ads means they cannot be changed frequently. SOURCE: PR:007 SOURCE: PR LAP 3—Ad-quipping Your Business (Types of Promotional Media)
88. B Reduce the cost of each spot. Packaged deals are meant to encourage businesses to spread their messages out over the day, week, or month. The spots will be heard during both prime and non-prime time slots. It is the responsibility of the radio station, not the advertiser, to fill its commercial air time. Purchasing a package of radio spots may or may not reduce the advertiser's need to use other media. SOURCE: PR:009 SOURCE: Arens, W.F. (2004). Contemporary advertising (9th ed.) [pp. 538-541]. Boston: Irwin/McGraw Hill.
89. A Neighboring, metropolitan, daily newspaper and local, weekly newspaper. The best way to gain maximum visibility for a promotion would be to use a neighboring, metropolitan daily and the local, weekly newspapers. It seems likely that a majority of the small town's population would subscribe to a daily newspaper in addition to the local publication. A national publication would be too expensive, and it's likely that very few residents would subscribe to this newspaper. Using the local paper by itself might not provide enough information for consumers who might need repetitive ads to act on the promotion. SOURCE: PR:010 SOURCE: pp. 341-342, Business Principles and Management. Everard, K.E.; Burrow, J.L., South- WesternPublishing Co., 10th ed., 1996.
90. B $131,950. Businesses that buy magazine advertising for a 12-month period often receive a discount based on the dollar volume of advertising. Basing the discount on the volume gives the business the option of buying advertising in a variety of sizes. For example, a business might buy eight full-page ads, six 1/2 page ads, and 12 1/4 page ads over a 12-month period. The discount is based on the dollar value rather than the frequency or page amount. In this example, the business will receive a 9% discount because it is purchasing $120,000 or more in advertising. To calculate the amount the business will pay, multiply the dollar volume by the percent of discount ($145,000 x 9% or .09 = $13,050). Then, subtract that figure from the dollar volume ($145,000 - $13,050 = $131,950). SOURCE: PR:104 SOURCE: Arens, W.F. (2004). Contemporary advertising (9th ed.) [pp. 505-506]. Boston: Irwin/McGraw Hill.
91. C Splitting sentences. If copywriters have too much material to fit on one page, they should be careful wherethey stop. They should avoid splitting sentences or paragraphs between the two pages. Copywriters shouldbegin the second page with a new paragraph. Copywriters should create headlines, include photographs whenappropriate, and list contacts. SOURCE: PR:057 SOURCE: PR LAP 10—Writing News Releases ENTREPRENEURSHIP 30
92. D Activities that will interest the public. The media are more likely to present publicity items that haveaudience appeal. Not all of a business's activities would be of interest to the public or the media.Activities of interest might include human-interest stories but should not be limited to that category.Copying the competition's publicity may occasionally be worthwhile but should not be a guideline to follow. SOURCE: PR:055 SOURCE: PR:055;PR LAP 8—Promoting Through Publicity
93. A $46,175. The affordable method of preparing a promotional budget involves subtracting all expenses and costs from total revenues in order to determine how much money remains for other activities. Once businesses know how much money is available, they can decide what portion of that they want to allocate to promotions. Small businesses often use this method because it is simple to calculate and prevents them from spending more money than they have. This method is based solely on what is affordable rather than on sales. In this example, calculate the amount that is available to spend on promotions by adding the total spent on salaries and wages and other operating costs to determine total expenses ($420,250 + $397,325 = $817,575). Then, subtract total expenses from total revenue ($863,750 - $817,575 = $46,175). The business has $46,175 remaining to spend on promotions or other activities. SOURCE: PR:098 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 415). Woodland Hills, CA: Glencoe/McGraw-Hill.
94. B Determine if the item should be eliminated from the product line. If sales for a specific item have been low or slow moving, it might be in the best interest of the company to drop the item from the product line because warehousing such items for long periods of time can cost the company money. A company's overall financial status cannot be examined by looking at the sales movement of one item. Financial information is compiled from a variety of other sources. Reorder sales of the specific item can be evaluated by the product analysis; however, overall reorder sales for all products cannot be evaluated. The relationships between salespeople and customers cannot be evaluated by extracting information about one product from one source. SOURCE: SE:056 SOURCE: Hite, R., & Johnston, W. (1998). Managing salespeople: A relationship approach (pp. 395- 396). Mason, OH: South-Western.
95. A Unethical behavior. An ethical manager does not discuss an employee's confidential information (e.g., performance evaluations, health issues, personal problems, salary) with other employees. Ethical managers treat employees with respect and do not share private information. Discussing an employee's personal matters with others usually leads to distrust and morale problems among the company's employees. Managers who share this type of information are not using sound judgment. Sharing one employee's confidential information with others is not an example of impartial feedback or office communication. However, it may be considered office gossip, which also may be unethical. SOURCE: SM:002 SOURCE: DuBrin, A.J. (2003). Essentials of management (6th ed.) [p. 82]. Mason, OH: South-Western.
96. D Appendices. At the end of the document are the appendices—the extra bits of information that describe or lend support to a point made in the document. The table of contents lists all of the business plan's sections with corresponding page numbers, so that information is easily accessible. The executive summary gives an overview of the entire document. The company description accurately portrays the new company or venture, provides a history of the company, and shows the current business structure, among other things. SOURCE: SM:007 SOURCE: SM LAP 1—Plan Now, Succeed Later (Nature of Business Plans) ENTREPRENEURSHIP 31
97. D Measurable. Objectives are goals to be reached. Effective objectives are goals that can be measured or evaluated. For example, an objective of 15% market share for the next year contains the measurable value of 15%. In addition, meaningful objectives should be specific rather than vague or general. They should have identifiable limits that are possible to attain. SOURCE: SM:008 SOURCE: DuBrin, A. (2009). Essentials of management: Instructor's edition (8th ed.) [pp. 116-117]. Mason, OH: South-Western Cengage Learning.
98. B Core values. A mission statement is a brief summary that defines the purpose of the organization. A mission statement reflects the philosophies, ideologies, beliefs, and priorities of the organization's owner(s)—all of which make up the business's core values. The business's goals, ethics policies, and touch points are based on the business's core values. SOURCE: SM:009 SOURCE: Performance Solutions. (n.d.). Characteristics of good mission statements. Retrieved April 21, 2011, from http://www.performancesolutions.nc.gov/strategicplanning/1developmvcv/docs/GoodMission StatementCharacteristics.pdf
99. B Market analysis. A competitive analysis should be included as part of a business plan's overall market analysis. A competitive analysis is not included in the appendices, executive summary, or financial plan. The appendices are the extra bits of information provided to support points already made in the business plan. The executive summary is a two- to three-page “miniature” of the full plan. The financial plan addresses the business's ability to generate a profit as well as its financing needs. SOURCE: SM:013 SOURCE: SM LAP 2—Plan for Success (Create a Business Plan)
100. D Gross profit. Net profit or net income is gross profit less expenses. Net sales would be the amount of sales remaining after refunds and allowances for returned or defective goods. Overhead is the costs that result from the operation of a business. SOURCE: SM:005 SOURCE: Bond, R. (2001). Retail in detail: How to start and manage a small retail business (2nd ed.) [pp. 122-124]. Central Point, OR: Oasis Press.