SBE 310 Week 8 Final Exam - 100% Correct Answers ( Graded An A+)

SBE 310 Week 8 Final Exam 1. (TCO 1) Approximately what percentage of businesses have a payroll with fewer than 500 people? (Points : 5) 10 percent 25 percent 75 percent 99 percent 2. (TCO 1) You hav ...

SBE 310 Week 8 Final Exam 1. (TCO 1) Approximately what percentage of businesses have a payroll with fewer than 500 people? (Points : 5) 10 percent 25 percent 75 percent 99 percent 2. (TCO 1) You have a small business that offers printing services. One of the services you offer is a high-speed color copier. You are currently the only printing service in a tri-state area that offers such a service. You currently have . (Points : 5) Creative destruction A competitive advantage A qualitative advantage A capital advantage 3. (TCO 1) Your employees are your most valued assets due to their . (Points : 5) Skill, knowledge, and information Earnings Knowledge of finance and accounting College degree and high IQ 4. (TCO 1) Entrepreneurship primarily involves which phase of business? (Points : 5) The startup process Hiring of key employees Maintaining a positive cash flow Building and maintaining a sufficient customer base 5. (TCO 1) Which of the following is the most common form of business ownership? (Points : 5) Sole proprietorships Partnerships Corporations Joint ventures 6. (TCO 4) Which of the following acts was written to prevent large businesses from forming trusts? (Points : 5) Clayton Act Federal Trade Commission Act Fair Debt Collection Practices Act Civil Rights Act of 1964 7. (TCO 4) Bankruptcy remains on a credit report for how many years? (Points : 5) 3 years 5 years 7 years 9 years 8. (TCO 4) Peter Drucker stated that businesses have basic functions. (Points : 5) Two Three Four Five 9. (TCO 4) Managing inventory can be compared to which of the following? (Points : 5) A balancing act Preparing for a test Driving a bus Lion taming 10. (TCO 4) What is the key word in evaluating a channel of distribution? (Points : 5) Location Plastics Competition Efficiency 11. (TCO 4) A long-term agreement to rent a building, equipment, or other assets is known as a: (Points : 5) Lease Rental contract Legally liable contract Business contract 12. (TCO 4) Consumers typically do not want the cheapest product available; they want the: (Points : 5) Best product for the highest price Most reasonable product at the highest price Most reasonable product at the lowest price Best product for the most reasonable price 13. (TCO 4) The point at which total cost equals total revenue and the business is neither making or losing money is known as the . (Points : 5) Profit area Loss area Breakeven point Profit point 14. (TCO 2) Through the franchise agreement, the gains the benefit of the parent company's expertise, experience, management systems, marketing, and financial help. (Points : 5) Franchisor Franchisee Leaser Lessee 15. (TCO 2) The financial document that is used by startup businesses to show where capital comes from and for what it will be used is called: (Points : 5) Cash-flow statement Projected earnings statement Sources and uses of funds Income statement 16. (TCO 2) Which of the following is not included in the marketing plan section of the business plan? (Points : 5) How sales forecasts will be reached Marketing objectives Identification of potential markets Cash-flow statements 17. (TCO 3) When analyzing financial statements, remember that profits can be increased and expenses can be decreased to make the records look better . (Points : 5) In the short run In the long run For tax purposes For bank audits 18. (TCO 3) In the chapter opener, what was the limitation that kept Philip Rosedale from creating Second Life when he first had the idea for it? (Points : 5) He didn't have enough money. He didn't know how to promote it. Computers were not powerful enough at the time. Some technical gadget like a flux capacitor needed to be invented first. 19. (TCO 3) Most Inc. 500 companies receive more than half of their revenue from: (Points : 5) Their local area Their regional area Outside their home regions and internationally A 100-mile proximity of their business 20. (TCO 3) Computers, office equipment, and furniture are all examples of that have a life of more than one year. (Points : 5) Current assets Current liabilities Capital equipment assets Investments 21. (TCO 5) Mintzberg suggested several important skills a manager needed in order to perform the four functions of management. The most important of these was listed as (Points : 5) Carrying out negotiations Motivating subordinates Making decisions in conditions of extreme ambiguity in allocating resources Being willing to continually learn on the job 22. (TCO 5) Maslow's hierarchy of needs theory ranks the highest level of needs as what? (Points : 5) Physiological Safety and security Esteem Self-actualization 23. (TCO 5) The Equal Employment Opportunity Commission that the information from a job analysis be used to ensure equal employment opportunity. (Points : 5) Strongly urges and sometimes requires Always requires Urges Does not care 24. (TCO 6) A production process that operates for long periods of time without interruption is known as? (Points : 5) Analytic system Synthetic system Continuous process Intermittent process 25. (TCO 6) Scheduling is necessary to maximize levels of: (Points : 5) Efficiency and customer service Customer service and expense Sales and expense Efficiency and effectiveness 26. (TCO 7) An account number of 13 would represent which of the following accounts? (Points : 5) Accounts payable Accrued taxes Insurance expense Accounts receivable 27. (TCO 7) Equity funds never need to: (Points : 5) Be repaid Be accounted for Be stated on the income statement Be stated on the balance sheet 28. (TCO 8) About what percent of small businesses export goods and services? (Points : 5) 10% 15% 30% 50% 29. (TCO 9) The obligation of business to maximize the positive impact it has on society while minimizing the negative impact is called: (Points : 5) Moral obligation Business responsibility Business ethics Social responsibility 30. (TCO 9) Threats and opportunities to a business can be found in which of the following environments? (Points : 5) Economic and legal only Legal and sociocultural only Technological and competitive only Economic, legal, sociocultural, competitive, and technological 1. (TCO 1) Compare and contrast a sole proprietorship, a partnership and a corporation. Provide examples of where you would use each structure. (Points : 14) Answer – Sole proprietorship, partnership and corporation are three of the most used forms of business with distinct characteristics and benefits. Sole proprietorship is a business that is owned and operated by one person, called the owner of the business and there are no legal requirements to form a sole proprietorship. A partnership is formed when two or more people come together to form a business, with the intention of making profits. Like a sole proprietorship, there are no legal requirements for people to form a partnership. On the other hand, a corporation is a form of business that is an autonomous entity in itself and is different from its owners and managers. To form a corporation the business s must comply with the charter of the state it operates in and must have filed legal paperwork after which it would come into existence. The biggest advantage of a sole proprietorship is its simplicity in formation and operation, where the owner can start it straight away and close it without any objections. The partnership is more complex than that as more entities are involved, however based on their mutual understanding it is also easy to form and operate. On the other hand, the corporation is complex to start off, and complex to maintain as it would have to comply with multiple legal and regulatory requirements and operate in the framework that is required. In terms of ability to raise capital and in terms of risk and liability, the corporation has the best advantage as it would be able to effectively use a variety of means such as equity and debt from a variety of sources to easily raise capital. Also, the liability of the corporation would be limited to company owned assets and assets of the owners and managers are not at risk. In terms of a partnership, the ability to raise funds is limited by the capital the owners can bring in and the amount of debt they are able to raise. Also, unless the partnership is a limited partnership, the partners would be personally liable for the debts of the company. The ability for raising loans and capital is most restricted for the sole proprietor who has to use his funds and sources, and apply for loans that would hold him personally should the business default. Examples where each structure can be used – - The sole proprietorship can be the best structure where a single person has all the skills required and is starting off a business with his own funds. He would have complete control over the business and be able to take decisions that he feels are best - The partnership can be used when a set of skills possessed by a set of people are needed to start off the business, such as a firm of lawyers or doctors. This would be useful as they can together become more effective, operate more efficiently and leverage each others strengths to grow profitably - For a business that had been in the business for long as a sole proprietorship or partnership, if it wants to raise funds and expand, it can first change its form of business to corporation and then raise funds to finance its growth and expansion plans 2. (TCO 3) Analyze the advantages and disadvantages of buying an existing business. Under what circumstances would one be more advantageous? (Points : 14) Answer – There are many advantages and certain disadvantages that go along with the decision to buy an existing business, as discussed below Advantages - Quick enter into the market – With an established business, a company can quickly enter into a market and start operating at full service, thus reducing the time taken for establishing oneself - A steady customer base is established – The existing business would already have a steady customer based that can be a source of critical flows that would help run the business - The business location is familiar to customers – The business is already well established and people know where it is, thus lower marketing and advertising costs - There is historical data that can be used for planning – As the business had been operating for a long time, it would have relevant and important data that can be used for making critical business decisions - Inventory and infrastructure already in place – The company would already have the inventory and infrastructure in place, thus avoiding the costs of enlisting new suppliers and starting from scratch, enabling saving of valuable time - Experienced employees already hired and trained – The business would already have a set of employees trained in that industry, hence lower training and hiring costs - Systems and processes already established – As the business is a running concern, there are systems and processes that are already established and these can then be used as a foundation for improving - Brand image already built in the customer – A positive and powerful brand if existing already can be very effectively used to scale up and expand operations are a very fast pace Disadvantages - Negative brand image may be difficult to change – If the business that is being sold has a negative brand image, it may be difficult to convince customers and society otherwise - Lack of motivation or talent in employees – The employees may leave the company pr may not be talented or as motivated as required that would bring down the desired level of performance - Ineffective and inefficient processes – The company may not have been operating well and would have inefficient systems and processes that reduce the efficiency and effectiveness of the business - Obsolete and end of life equipment – The inventory may be outdated and the equipment and infrastructure end of life due to which there could be need for a lot of capital investment - Liabilities from past business contracts – The business may face a lot of liability from past business contracts or lawsuits that could hamper business goals - Business location is fixed and cant be changed easily – The location of the company is not good due to which it is not profitable, and it cannot be changed as well easily - Misrepresentation and hiding of facts by person selling business - The person selling the business may have misrepresented facts that can lead to the buy not meeting objectives and goals Given that there are many advantages to buying a business, it is required that a company perform thorough due diligence when they decide to buy, and should buy only after performing checks multiple times from different dimensions. After this, the decision to buy a business should be based on objectives such as the time to market, the market position, the amount of finance available and if the business would get a competitive advantage by deciding to buy the business. 3. (TCO 4) Compare and contrast Economic Order Quantity and Just-In- Time as inventory control methods. Evaluate how these control methods can improve the financial position of a small business. (Points : 14) Answer – Two of the often used methods of inventory control, the Economic Order Quantity and Just In Time inventory control methods are compared and contrasted. Economic order quantity is a traditional method of inventory control that aims to minimize the total costs of inventory by balancing the ordering costs with the holding costs of an inventory item. EOQ tries to arrive at the right quantity of inventory that should be ordered at a time that would lead to minimization of the overall cost of inventory, which is a total of inventory ordering costs and inventory holding costs. On the other hand, Just In Time is a inventory managements system is based on the idea that a firm that is managed well does not need to pile up inventory, and to order smaller quantities and closer to the time when the inventory is actually needed. In Just In time, the total capital that is stuck in inventory is minimized, leading to better working capital management with the business being able to run in a very lean and efficient fashion. The EOQ method in comparison would have to have more working capital requirement as it would need to purchase all the inventory at once and store it even though it may not be used straight away. Another advantage of the JIT method is that it has lower risk of inventory going obsolete as it will always order late and close to when the inventory is actually needed. Both these techniques can be used by a small business to very effectively manage inventory, and through it operate better financially. With the EOQ, as the business would be ordering the inventory at quantities that would lower total cost, it would be making best use of its funds leading to better return on investment. In case of JIT, as the firm would order lower quantities of inventory, it would be able to operate at much high efficiency levels and have lower working capital requirements, thus enabling small businesses to do more and serve more customers even with a lower capital base. Thus both these techniques can be very effectively used to ensure a better financial position for a small business. 4. (TCO 6) Compare and contrast analytic manufacturing systems and synthetic manufacturing systems, giving an example of each. (Points : 14) Answer – The major different between analytic and systemic systems is the way they treat inputs and the end product they come up with. Analytic systems are systems that reduce inputs into component parts so as to extract products. Examples of analytical systems include automobile salvage businesses that buy damaged or end of life cars and vehicles from insurance companies or from individuals so that they can dismantle them for parts or for extracting the scrap iron to sell. Synthetic systems on the other hand are systems that combine a number of inputs to create a finished product or to change the inputs into a different product. Example of a synthetic system is an automobile production system that takes steel and other inputs into the systems and creates them into a car. Another example is that of a restaurant that takes inputs such as vegetables and meat and converts them into meals that can be eaten. 5. (TCO 9) Analyze the four levels depicted in the pyramid of social responsibility. (Points : 14) Answer - The four levels of social responsibility as per the pyramid of social responsibility are listed and analyzed below Economic responsibility – At this level, the responsibility of the firm is to be profitable and earn profits and revenues for its stakeholders and society. This is the foundation on which the other levels rest as the firm would first need to have resources and sources based on which it can perform its other duties. Legal Obligations – As part of this level, it is the responsibility of the organization to obey the law, and ensure that the company is operating as per the legal framework and rules that have been set by the law. As part of this, various compliance requirements must be met, and there must be rules followed in every aspects of the business such as HR, finance, operations and marketing Ethical responsibility – At this level, it is the duty of the firm to be ethical and ensure that all the actions and decisions that are taken are in line with ethical and moral principles. The firm at this level would do what is right, just and fair and would avoid causing harm or pain to any stakeholder in society. Philanthropic Goodwill – At this level, the firm targets and aims to be a good corporate citizen, and to actively and significantly contribute to making the society in which it operates better. It would contribute to causes with the objectives of making and enhancing the quality of life in the society.