Learning Objectives: Quick answer key: Question # Multiple Choice True/False

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2 Learning Objectives: 11.1 Describe the advantages and disadvantages of the most common forms of business ownership Identify the stakeholders of a business and describe why they are important Discuss the impact of environmental forces on a business Understand the purpose of a business plan and identify its key components Describe how a business obtains competitive advantage Explain the manager s role in monitoring business profits. Quick answer key: Question # Multiple Choice True/False 1 B False 2 B True 3 C True 4 C False 5 D True 6 A False 7 C True 8 C True 9 B False 10 A False 1

3 11 B True 12 C True 13 B True 14 C True 15 D False 16 D False 17 A False 18 B True 19 D False 20 C True 21 C True 22 B False 23 A True 24 C 25 A 26 C 27 D 28 A 29 C 30 B 2

4 Multiple Choice Questions: 1. Why is it important for managers to possess an understanding of basic business principles? A) to protect intellectual property B) to make better decisions C) to strengthen interpersonal skills D) to be able to write a business plan Answer B 2. An advantage of the corporate form of business ownership is, while a disadvantage is? A) ease of entry; unlimited liability B) limited liability; double taxation C) shared ownership; long hours D) favorable taxation; regulation Answer B 3. Which group represents external stakeholders of a business? A) employees B) governing board of directors C) customers D) executives Learning Objective

5 4. Why are business processes continuously monitored for improvement? A) to maintain the transformation of inputs into outputs B) to maintain the flow of goods and services C) to maintain competitive advantage D) to fulfill the business plan Learning Objective Which of the following are key components of a business plan? A) facilities, equipment and maintenance plans B) strengths, weaknesses, opportunities, and threats C) assets, liabilities, capital and financial ratios D) management, finance, capital, and market research Learning Objective 11.4 Answer D 6. Improvement in which of the following will result in greater efficiencies in the supply chain? A) forecasting demand B) identifying stakeholders C) business planning D) economic forces Learning Objective 11.5 Answer A 7. What type of industries offer intangible products, such as banking, transportation, and utilities? A) manufacturing industries B) exploration industries C) service industries D) agricultural industries 4

6 Learning Objective Which term represents the amount of money a business earns above what it spends for goods, services, salaries, expenses, and taxes? A) revenues B) expenses C) profits D) losses Learning Objective 11.6 Answer - C 9. Which business tool facilitates the objective evaluation of new products or business ventures? A) root cause analysis B) feasibility analysis C) cost/benefit analysis D) strategic analysis Learning Objective 11.6 Answer B 10. Which would be most appropriate to use to protect the unique brand of a well-known athletic shoe? A) trademark B) service mark C) copyright D) patent Learning Objective 11.5 Answer A 5

7 11. Which of the following forms of business is most used by home and web-based businesses? A) partnership B) sole proprietorship C) corporation D) franchise Answer B 12. Which of the following best defines a form of business that is owned and controlled by the people who use it, and who pool their resources for mutual gain? A) partnership B) franchise C) cooperative D) joint venture 13. Which of the following best defines a partnership with one or more general partners and one or more limited partners? A) general partnership B) limited partnership C) master limited partnership D) limited liability partnership Answer B 6

8 14. Which of the following best defines a partnership that acts like a corporation and is traded on a stock exchange, but is taxed like a partnership? A) general partnership B) limited partnership C) master limited partnership D) limited liability partnership 15. What is the difference between a joint venture and a strategic alliance? A) A joint venture is a long-term partnership between two or more companies established to help each company build competitive market advantage. A strategic alliance is a partnership between two or more companies to undertake a major project. B) A joint venture is a partnership where all partners possess unlimited liability and share in managing the business. A strategic alliance is a partnership that limits the liability of an individual partner to the mistakes they or people under their supervision make. C) A joint venture is a partnership that limits the liability of an individual partner to the mistakes they or people under their supervision make. A strategic alliance is a partnership where all partners possess unlimited liability and share in managing the business. D) A joint venture is a partnership between two or more companies to undertake a major project. A strategic alliance is a long-term partnership between two or more companies established to help each company build competitive market advantage. Answer D 16. What are the three types of corporations? A) C corporations, S corporations, LLP corporations B) C corporations, LLP corporations, LLC corporations C) S corporations, LLP corporations, LLC corporations D) C corporations, S corporations, LLC corporations Answer D 7

9 17. Which of the following is a disadvantage of a franchise? A) large start-up costs B) double taxation C) reliant on board of directors D) unlimited personal liability Answer A 18. Which of the following is an internal stakeholder? A) competitors B) stockholders C) allies D) customers Learning Objective 11.2 Answer B 19. Which of the following best defines sociocultural economic forces? A) Forces that are influences on an organization from changes in the characteristics of the population. B) Forces that result in new methods and innovations for doing business and transforming resources into goods and services. C) Forces that consist of general economic conditions and trends. D) Forces that are influences and trends in human relationships and values. Learning Objective 11.3 Answer D 8

10 20. Which of the following best defines demographic forces? A) Forces that are changes in the global economic, political, legal, and technological systems. B) Forces that are changes in the way politics shape laws and laws shape the opportunities for and threats to an organization. C) Forces that are influences on an organization from changes in the characteristics of the population. D) Forces that are influences and trends in human relationships and values. Learning Objective Which of the following falls into the category of a service industry? A) agriculture B) mining C) advertising D) construction Learning Objective Which of the following is the first section of a business plan? A) company background B) executive summary C) location analysis D) capital required Learning Objective 11.4 Answer - B 9

11 23. Which of the following is NOT a part of a business plan? A) technology plan B) financial plan C) marketing plan D) manufacturing plan Learning Objective 11.4 Answer A 24. Which type of business should have a business plan? A) Large corporations require a business plan for funding, while small businesses can get by without a business plan. B) Small businesses require a business plan for funding, and for long term objectives. Large corporations don t need a business plan because of already being established. C) Both new and existing business, large and small should have a business plan, and update it consistently. D) Business that require funding are the only businesses the truly require a business plan. Learning Objective Which of the following best defines the feature of a product or service which offers customers greater value than similar offerings from competitors? A) competitive advantage B) corporate advantage C) first-mover advantage D) strategic advantage Learning Objective 11.5 Answer A 10

12 26. Which three common tools do managers use to analyze competitive intelligence and develop competitive advantage? A) Five Forces Model, three generic strategies, supply chain analysis B) Competitive Forces Model, three generic strategies, value chain analysis C) Five Forces model, three generic strategies, value chain analysis D) Competitive Forces Model, three generic strategies, supply chain analysis Learning Objective What are the key components of the Five Forces Model? A) rivalry among new competitors, threat of substitute products or services, threat of new entrants, supplier power, buyer power B) rivalry among existing competitors, threat of economic forces, threat of new entrants, supplier power, buyer power C) rivalry among new competitors, threat of economic forces, threat of new entrants, supplier power, buyer power D) rivalry among existing competitors, threat of substitute products or services, threat of new entrants, supplier power, buyer power Learning Objective 11.5 Answer D 28. What are the three generic business strategies for entering a new market? A) broad cost leadership, broad differentiation, focused strategy B) broad cost leadership, focused differentiation, focused strategy C) focused leadership, broad differentiation, focused strategy D) broad cost leadership, focused differentiation, broad strategy Learning Objective 11.5 Answer A 11

13 29. Which of the following best defines the total amount of money a business takes in during a given period as a result of selling its goods or services? A) expenses B) profit C) revenue D) cost Learning Objective Which of the following best defines a decision making tool that involves gathering and objectively evaluating data about the strengths, weaknesses, opportunities, and threats of a new product or business venture? A) cost/benefit analysis B) feasibility analysis C) competitive analysis D) forecast modeling Learning Objective 11.6 Answer B 12

14 True/false Questions: 1. A sole proprietorship is a business operated by a single individuals, often called an entrepreneur which carries no risk of personal loss. 2. A partnership is a legal form of business with two or more owners. 3. A limited partnership is partnership with one or more general partners and one or more limited partners. 4. A master limited partnership is a partnership that limits a partners risk of losing their personal assets to only their own acts and omissions and to the acts and omissions of people under their supervision. 5. A joint venture is a partnership in which two or more companies join to undertake a major project. 13

15 6. There are three types of corporations, C corporations, S corporations, and LLS corporations. 7. Double taxation affects corporations in the US, as they are taxed at the business level and individual level. 8. A cooperative is a business owned and controlled by the people who use it. 9. External staked holders are from outside the organization and include employees, owners, stockholders, and the board of directors. Learning Objective Economic forces arise from changes in the characteristics of a population, such as age, gender, family size and ethnic origin. Learning Objective Sociocultural forces are influences and trends in human relationships and values that may affect an organization s products and services. Learning Objective

16 12. The products of business fall into two broad categories goods and services. Learning Objective A business plan is a written document that describes the nature of a business in very specific terms. Learning Objective The first part of a business plan is its cover letter. Learning Objective Information on a company s background is the first section of a business plan. Learning Objective Competitive intelligence is the ability of a company to increase its market share by being first with a new competitive advantage. Learning Objective Three generic business strategies include broad cost leadership, broad differentiation, and broad strategy. Learning Objective A value chain analysis is a business tool used to determine how to create the greatest possible value for customers. Learning Objective

17 19. The main goal of a business is for a business to make revenue so that the business can continue to be operational. Learning Objective 11.6 Note: The main goal is for a business to make a profit, not just earn revenue. 20. Forecast modeling is the managerial practice of predicting future sales revenues based on past performance and current conditions. Learning Objective A feasibility analysis is a decision making tool that involves gathering and objectively evaluating data about strengths, weaknesses, opportunities, and threats. Learning Objective Trademarks are applied to products, while service marks are applied to logos, phrases, and designs. Learning Objective Patents are similar to copyrights and are used to protect inventions. Learning Objective

18 Short Answer questions: 1. List and explain the four types of business partnerships. Answer The four types of partnerships are general partnership, limited partnership, master limited partnership (MLP), and limited liability partnership (LLP). A general partnership is where all partners possess unlimited liability and share in actively managing the business. A limited liability is a partnership with one or more general partners and one or more limited partners. A master limited partnership is a partnership that acts like a corporation and is traded on a stock exchange, but is taxed like a partnership. A limited liability partnership is a partnership that limits a partners risk of losing their personal assets to only their own acts and omissions, and to the acts and omissions of people under their supervision. 2. What is the difference between a joint venture and a strategic alliance? Answer A joint venture is a partnership between two companies who join to undertake a major project. A strategic alliance is a long-term partnership between two or more companies established to help build a competitive market advantage. 3. What are the six environment forces that impact businesses? Answer economic, technological, sociocultural, demographic, political-legal, and global forces all effect businesses day-to-day operations. 4. What are the three common tools used to analyze competitive intelligence and develop competitive advantage. Answer The three common tools are The Five Forces Model, the three generic strategies, and the value chain analysis. 17

19 5. Explain the differences between profit, revenue, and expenses. Answer Profit is the amount of money a business earns above and beyond what it spends for goods, services, salaries, and other expenses. Revenue is the total amount of money a business takes in during a given period as a result of selling its goods or services. Expenses are the costs of making or purchasing the goods and services that are needed to operate a business. 18