Test Bank Business in Action, 9th Edition Courtland L Bovee
Business in Action, 9e (Bovee/Thill)
Chapter 1 Developing a Business Mindset
1) ________ is money that an organization brings in through the sale of its goods and services.
A) Competitive advantage
B) Revenue
C) Sales
D) Capital investment
E) Finance
Answer: B
Explanation: Revenue is the money a company brings in through the sale of goods and services.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
2) The risk and reward relationship ________.
A) is a key aspect of social responsibility
B) applies only to service-intensive businesses
C) is essential to the counter-cyclical business model
D) is fundamental to businesses in every modern economy
E) is an outdated concept that's been replaced by corporate sustainability
Answer: D
Explanation: A company needs to see some promise of reward before it will decide to accept the risks involved in creating and selling products. However, to ensure responsible behavior, these risks need to stay attached to those decisions, meaning that if the decisions turn out bad, that company should suffer the consequences.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
3) A(n) ________ is a framework of how a business intends to generate revenue.
A) business model
B) strategic management tool
C) profitability analysis
D) competitive advantage
E) entrepreneurial mindset
Answer: A
Explanation: A company's business model is a clear, simple outline of how the business intends to generate revenue.
Difficulty: 1: Easy
AACSB: Analytical thinking
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
4) ________ is the term used to describe the difference between revenue and expenses.
A) Economies of scale
B) Interest
C) Sales
D) Owner's equity
E) Profit
Answer: E
Explanation: Profit is the amount of money left over after all the costs involved in doing business, have been deducted from revenue.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
5) ________ refers to some aspect of a product or company that makes it more appealing to target customers.
A) Competitive advantage
B) Economies of scale
C) Horizontal integration
D) Vertical integration
E) Barrier to entry advantage
Answer: A
Explanation: Competitive advantage refers to some aspect of a product or company that makes it more appealing to target customers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
6) An organization that seeks to operate efficiently and effectively to achieve its goals without focusing on profit as a motive is a ________.
A) business intermediary
B) nonprofit organization
C) service business
D) government-owned corporation
E) goods-producing business
Answer: B
Explanation: Not-for-profit organizations (also known as nonprofit organizations) such as museums, most universities, and charities do not have a profit motive.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
7) If individuals and companies believe they can pursue rewards without facing the risks that should be attached to those pursuits, they are more likely to engage in irresponsible and even unethical behavior. This situation is known as a(n) ________.
A) ethical dilemma
B) professional dilemma
C) barrier to entry
D) competitive advantage
E) moral hazard
Answer: E
Explanation: If individuals and companies believe they can pursue rewards without facing the risks that should be attached to those pursuits, they are more likely to engage in irresponsible and even unethical behavior—a situation known as moral hazard.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
8) Business is any profit-seeking organization that provides goods and services designed to satisfy customers' needs.
Answer: TRUE
Explanation: In a general sense business can be defined as any profit-seeking organization that provides goods and services designed to satisfy customers' needs.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
9) Profit refers to the money the company brings in through the sale of goods and services.
Answer: FALSE
Explanation: Profit is the amount of money left over after expenses—all the costs involved in doing business—have been deducted from revenue.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
10) Businesses add value by transforming lower-value inputs (like paper and ink) into higher-value outputs (like textbooks).
Answer: TRUE
Explanation: Businesses add value by transforming lower-value inputs to higher-value outputs. In other words, they make goods and services more attractive from the buyer's perspective.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
11) In a free-market economy, companies generally have limited autonomy in deciding which customers they want to focus on and how they want to compete.
Answer: FALSE
Explanation: In a free-market economy, companies generally have considerable freedom in deciding which customers they want to focus on and how they want to compete.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
12) A company has competitive advantage when its products are more appealing to its chosen customers.
Answer: TRUE
Explanation: Competitive advantage makes a company's products or the company as a whole more appealing to its chosen customers.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
13) Assets refer to the tangible economic resources owned by a firm.
Answer: FALSE
Explanation: Assets refer to anything of meaningful value, from patents and brand names to real estate and company stock.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
14) A firm uses competitive advantage to reduce its costs. Using competitive advantage is an example of barrier to entry.
Answer: FALSE
Explanation: Barrier to entry refers to any resource or capability a company must have before it can start competing in a given market.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
15) Difficulty in obtaining business permits or licenses to perform a particular type of business would be an example of a barrier to entry for a firm.
Answer: TRUE
Explanation: Barrier to entry refers to any resource or capability a company must have before it can start competing in a given market.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
16) How are not-for-profit organizations different from most businesses?
Answer: The driving forces behind most businesses are the prospects of earning profits and building assets, which are anything of meaningful value, from patents and brand names to real estate and company stock. In contrast, not-for-profit organizations (also known as nonprofit organizations) such as museums, most universities, and charities do not have a profit motive. However, similar to goods-producing businesses, they must operate efficiently and effectively to achieve their goals. A nonprofit organization might use many of the business-management principles used by other businesses such as a goods-producing business.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
17) Explain barrier to entry with an example.
Answer: Barrier to entry refers to a resource or capability a company must have before it can start competing in a given market. Barriers to entry include government testing and approval, tightly controlled markets, strict licensing procedures, limited supplies of raw materials, and the need for highly skilled employees.
Difficulty: 3: Challenging
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.
18) ________ refers to a view of business that considers the many decisions that must be made and the potential problems that must be overcome before the organization can deliver its products or services.
A) Business mindset
B) Service orientation
C) Free-market philosophy
D) Competitive advantage
E) Business model
Answer: A
Explanation: A business mindset refers to a view of business that considers the many decisions that must be made and the potential problems that must be overcome before the organization can deliver its products or services.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
19) What key aspect of running a business includes the ability to offer valuable goods and services while contributing to society?
A) Corporate social responsibility
B) Business mindset
C) Opportunities in the marketplace
D) Vertical integration
E) Producing intangibles
Answer: A
Explanation: Business has the potential to contribute to society in many useful ways including offering goods and services, providing employment, paying taxes, and contributing to national growth, stability, and security.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
20) Businesses can impact society in both positive and negative ways. Occupying land and displacing existing businesses are examples of ________.
A) generating pollution
B) disrupting communities
C) creating waste
D) creating safety risks
E) causing financial instability
Answer: B
Explanation: From occupying land to displacing existing businesses to overloading schools and roads with employees and their children, growing businesses can disrupt communities even as they provide employment and other benefits. And when businesses fall into decline, they can leave behind everything from abandoned buildings to laid-off workers.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
21) Who are the people who apply entrepreneurial strategies to cause large-scale social change?
A) Government regulators
B) Social responsibility leaders
C) Social entrepreneurs
D) Business mindset entrepreneurs
E) High-value output leadership
Answer: C
Explanation: Social entrepreneurs, people who apply entrepreneurial strategies to enable large-scale social change, use business concepts to create change.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
22) Intangible products have a physical presence.
Answer: FALSE
Explanation: Intangible products create value by performing activities that deliver some benefit to the customer. They do not have physical presence.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
23) A business mindset is a view of business that considers the various decisions a business has to make as well as the challenges that it must overcome in order to be successful.
Answer: TRUE
Explanation: A business mindset is a view of business that considers the various decisions a business has to make as well as the challenges that it must overcome in order to be successful.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
24) Businesses can have both positive and negative effects on society.
Answer: TRUE
Explanation: The relationship between business and society is complex and far-reaching. Businesses can have both positive and negative effects on society.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
25) Compare and contrast the perspective of a business professional with that of a consumer.
Answer: Consumer experiences include the impact of poor customer service, a sense for product value, and the entire experience of searching for, purchasing, and owning products. While a customer thinks about the cost of buying a particular product, a business professional thinks about the cost of making it, promoting it, and distributing it. A business professional focuses on what it takes to make a product stand out from the crowd and recognizes the importance of finding opportunities in the marketplace. He/she starts to develop a business mindset which involves an appreciation for the many decisions that must be made and the many challenges that must be overcome before companies can deliver the products that satisfy customer needs.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
26) Discuss the positive and negative role of business in society.
Answer: A business professional needs to recognize the positive and negative effects that business can have on society. Business has the potential to contribute to society in many useful ways, such as:
• Offering valuable goods and services.
• Providing employment, which enables employees to provide for themselves and their families. In addition, many companies help their employees meet the costs of health care, child care, insurance, retirement, and other living expenses.
• Paying taxes. Money collected from taxes that helps build highways, fund education, further scientific research, enhance public safety and national defense, and support other vital functions of government.
• Contributing to national growth, stability, and security. Beyond the mere dollars of taxes paid, a strong economy helps ensure a strong country.
Unfortunately, businesses don't always operate in ways that benefit society. The potentially negative effects that business can have on society include generating pollution and creating waste, creating health and safety risks, disrupting communities, and causing financial instability. The potential negative effects of business are serious matters, but employees can conduct themselves in ways that balance the profit motive with society's shared interests.
Difficulty: 3: Challenging
AACSB: Ethical understanding and reasoning
LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.
27) ________ refers to the resources or capabilities a company must have before it can start competing in a given market.
A) Assets
B) Economies of scale
C) Barriers to entry
D) Technological requirements
E) Fixed costs
Answer: C
Explanation: Barrier to entry is a resource or capability a company must have before it can start competing in a given market.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
28) Businesses that need very large amounts of money, equipment, or other material resources in order to get started are ________ businesses.
A) service sector
B) labor-intensive
C) competitively-advantaged
D) not-for-profit
E) capital-intensive
Answer: E
Explanation: Because they require large amounts of money, equipment, land, and other resources to get started and to operate, goods-producing businesses are often capital-intensive businesses.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
29) Population trends that change the composition of consumer markets and the workforce are a part of a company's ________ environment.
A) economic
B) regulatory
C) technological
D) social
E) political
Answer: D
Explanation: Every business operates within the broad social environment, the trends and forces in society at large. For instance, all companies are affected by population trends that change the composition of consumer markets and the workforce.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
30) Which one of the following is true regarding the economic environment of business that shapes the behavior of buyers and sellers?
A) Forces resulting from the practical application of science are affected by the economic environment.
B) Virtually every decision made is influenced by the economic environment.
C) Laws and regulations that restrain, support, and protect businesses protect the economic environment.
D) Targeted customers and competitors that market similar products will not affect the economic environment.
E) Population trends, social values, and relationships of society and business are dependent on the economic environment.
Answer: B
Explanation: Conditions and forces in the economic environment affect the cost and availability of goods, services, and labor; so they shape the behavior of buyers and sellers.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
31) All groups affected by a company's activities are referred to as its ________.
A) shareholders
B) customers
C) stakeholders
D) employees
E) suppliers
Answer: C
Explanation: Stakeholders refers to the internal and external groups affected by a company's decisions and activities.
Difficulty: 1: Easy
AACSB: Ethical understanding and reasoning
LO: 1.3: Discuss the five major environments in which every business operates.
32) The term ________ refers to forces resulting from the practical application of science to innovations, products, and processes.
A) social trends
B) research and development
C) barriers to entry
D) technological environment
E) business mindset
Answer: D
Explanation: The technological environment refers to forces resulting from the practical application of science to innovations, products, and processes.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 1.3: Discuss the five major environments in which every business operates.
33) The conditions that affect the cost and availability of goods, services and labor, and the behavior of buyers and sellers are BEST described as the ________ environment.
A) market
B) regulatory
C) legal
D) economic
E) social
Answer: D
Explanation: Virtually every decision a company makes is influenced by the economic environment, the conditions and forces that (a) affect the cost and availability of goods, services, and labor and (b) thereby shape the behavior of buyers and sellers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
34) The legal and regulatory environment would include ________.
A) demographic factors
B) technological innovations
C) the number of competitors in the market
D) preferences of the consumers
E) the speed of obtaining licenses
Answer: E
Explanation: Every business is affected by the legal and regulatory environment, the sum of laws and regulations at the local, state, national, and even international level.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
35) The policies and practices of government bodies would shape the ________ environment for a business.
A) legal and regulatory
B) technological
C) social
D) economic
E) market
Answer: A
Explanation: Every business is affected by the legal and regulatory environment, the sum of laws and regulations at the local, state, national, and even international level. The policies and practices of government bodies also establish an overall level of support for businesses operating within their jurisdictions.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
36) Which of the following is a component of the specific market environment within which each business operates?
A) Ethical restrictions
B) Competitors
C) Technological innovations
D) Environmental restrictions
E) The speed of granting permits and licenses
Answer: B
Explanation: Every company operates within a specific market environment composed of three important groups: (1) its target customers, (2) buying influences that shape the behavior of those customers, and (3) competitors—other companies that market similar products to those customers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
37) ________ refers to a company's target customers, the buying influences that shape the behavior of those customers, and competitors that market similar products to those customers.
A) Regulatory environment
B) Social environment
C) Economic environment
D) Market environment
E) Technological environment
Answer: D
Explanation: Market environment refers to a company's target customers, the buying influences that shape the behavior of those customers, and competitors that market similar products to those customers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
38) The practical application of science to products and innovations has the potential to create change in almost every facet of business, as part of the ________.
A) social environment
B) wearable and mobile technology revaluation
C) technological environment
D) economic environment
E) stakeholders' responsibility
Answer: C
Explanation: Technological environment stems from the practical application of science to innovations, products, and processes. Technological advances have the potential to change every facet of business, from altering internal processes to creating or destroying market opportunities.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 1.3: Discuss the five major environments in which every business operates.
39) What types of technologies are strong enough to create or destroy companies?
A) Connective
B) Gig
C) Mobile
D) Disruptive
E) Collaborative
Answer: D
Explanation: Disruptive technologies, those that fundamentally change the nature of an industry, can be powerful enough to create or destroy entire companies. Many of the technologies that you use in your academic, personal, and social activities, from digital audio and video to the Internet to social media, are disruptive technologies that have shaken up multiple industries.
Difficulty: 3: Challenging
AACSB: Information technology
LO: 1.3: Discuss the five major environments in which every business operates.
40) If mobile technology is a disruptive technology, why do organizations value integration of the technology?
A) Stakeholders are demanding an increase in the use of the newest technologies.
B) Mobile technology is more cost effective than traditional methods of communication.
C) Mobile technology is more consistent in international markets.
D) Once integrated, technology has fewer changes and is easy to maintain.
E) Mobile technology can boost productivity and help form closer relationships with customers.
Answer: E
Explanation: Mobile apps and communication systems can boost employee productivity, help companies form closer relationships with customers and business partners, and spur innovation in products and services. Given the advantages and the rising expectations of employees and customers, firms on the leading edge of the mobile revolution are working to integrate mobile technology throughout their organizations.
Difficulty: 3: Challenging
AACSB: Information technology
LO: 1.3: Discuss the five major environments in which every business operates.
41) What part of the market environment shapes the behavior of customers?
A) Target market
B) Buying influences
C) Competitors
D) Regulatory influences
E) Connectivity
Answer: B
Explanation: A market environment is composed of three important groups: (1) its target customers, (2) the buying influences that shape the behavior of those customers, and (3) competitors.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
42) Which of the following best describes a purpose-driven business?
A) A company that strives to create high financial return for stakeholders
B) A company that strives to do more than just make money
C) A company that strives to limit the demand for goods and services
D) A company that strives to follow all laws and regulations in the international environment
E) A company that strives to incorporate as much technology as possible
Answer: B
Explanation: A growing number of employees and company leaders believe that a company should strive for something more than just making money, giving rise to the concept of the purpose-driven business.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
43) Which of the following is one of the biggest expenses a company faces?
A) Stakeholder return
B) Taxes
C) Labor
D) Technology
E) Raw material
Answer: C
Explanation: Labor is typically one of a company's biggest expenses, so companies keep an eye out for new technologies that can reduce labor costs or improve labor productivity. Doing so can be good for business, but it can be bad for the workforce if fewer workers are needed.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
44) Which of the following best describes a gig economy?
A) Workers who telecommute at least part of the work week
B) Workers who use technology to track offerings of competitors
C) Independent workers who utilize sharing services
D) Independent contractors who work on short-term projects
E) Workers who use smartphones to produce services
Answer: D
Explanation: Millions of people now work full- or part-time in the gig economy. The gig economy, is made up of people who work as independent contractors on a series of short-term projects or tasks (colloquially known as "gigs"). Much of the work in the gig economy is either technology based or enabled by technologies such as website services and mobile apps.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
45) In addition to its target customers, who makes up a company's specific market environment?
A) Purpose-driven buyers
B) Stakeholders
C) Governments
D) Gig workers
E) Competitors
Answer: E
Explanation: Within the various environments every company operates within a specific market environment composed of three important groups: (1) its target customers, (2) the buying influences that shape the behavior of those customers, and (3) competitors–other companies that market similar products to those customers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
46) Forces resulting from the practical application of science to a company's products and processes would best describe its social environment.
Answer: FALSE
Explanation: Every business operates within the broad social environment. Social environment refers to the trends and forces in society at large. The technological environment stems from the practical application of science to innovations, products, and processes.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
47) A firm sets up a paper-manufacturing factory in a country which has very strict regulations regarding disposal of industrial waste. This increases the cost of production of the firm. This is an example of the social environment of the firm.
Answer: FALSE
Explanation: Every business operates within the broad social environment. Social environment refers to the trends and forces in society at large. The legal and regulatory environment includes the sum of laws and regulations at local, state, national, and even international levels.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.3: Discuss the five major environments in which every business operates.
48) The term stakeholders refers only to those people who have invested money in the company's stock.
Answer: FALSE
Explanation: All internal and external groups affected by a company's decisions and activities are referred to as its stakeholders.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
49) Compare and contrast the social environment and the economic environment of a business.
Answer: Social environment refers to the trends and forces in society at large. For instance, all companies are affected by population trends that change the composition of consumer markets and the workforce. The economic environment of a business consists of the conditions and forces that (a) affect the cost and availability of goods, services, and labor and (b) thereby shape the behavior of buyers and sellers. For example, a growing economy can help companies by increasing demand and supporting higher prices for their products, but it can also raise the costs of labor and the materials the companies need to do business.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
50) How is the legal and regulatory environment of a business related to barriers to entry?
Answer: Every business is affected by the legal and regulatory environment: the sum of laws and regulations at the local, state, national, and even international level. Some businesses, such as electricity and other basic utilities are heavily regulated, even to the point of government agencies determining how much such companies can charge for their services. The degree to which various industries should be regulated remains a point of contention, year in and year out. Government testing and approval, tightly controlled markets, strict licensing procedures can act as barriers to entry.
Businesses prefer to locate and do business in jurisdictions that offer lower costs, lower complexity, and greater stability and predictability. The policies and practices of government bodies establish an overall level of support for businesses operating within their jurisdictions. Taxation, fees, efforts to coordinate multiple regulatory agencies, the speed of granting permits and licenses, labor rules, environmental restrictions, protection for assets such as patents and brand names, roads and other infrastructure, and the transparency and consistency of decision making all affect this level of support.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
51) Compare and contrast the technological environment and the market environment within which a business operates.
Answer: The technological environment refers to forces resulting from the practical application of science to innovations, products, and processes. Technological changes have the potential to change every facet of business, from altering internal processes to creating or destroying market opportunities.
Every company operates within a specific market environment composed of three important groups: (1) its target customers, (2) buying influences that shape the behavior of those customers, and (3) competitors—other companies that market similar products to those customers. The nature and behavior of these groups and their effect on business strategy vary widely from industry to industry.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
52) ________ activities are intended to identify new ideas and designs that have the potential to result in new goods and services.
A) Information technology
B) Operations management
C) Research and development
D) Human resources
E) Accounting
Answer: C
Explanation: Research and development (R&D) refers to the functional area responsible for conceiving and designing new products. For companies that develop products, R&D is essential to their success because it provides the ideas and designs that allow these firms to meet customer needs in competitive markets.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
53) ________ is the act of designing new and better ways to run a company's operations.
A) Process R&D
B) Marketing
C) Purchasing
D) Facilities
E) Human resources
Answer: A
Explanation: Companies can engage in process R&D to design new and better ways to run their operations.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
54) Which of the following best describes the department where the company's products are made, or its service is performed?
A) Operations
B) Finance
C) Distribution
D) Process R&D
E) Marketing
Answer: A
Explanation: Variously called manufacturing, production, or operations, this area is where the company makes whatever it makes (for goods-producing businesses) or does whatever it does (for service businesses).
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
55) The ________ function of an organization coordinates the incoming flow of materials and the outgoing flow of finished products.
A) finance
B) logistics
C) human resource
D) purchasing
E) sales
Answer: B
Explanation: Logistics involves coordinating the incoming flow of materials and the outgoing flow of finished products.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
56) Which of the following activities would be a part of facilities management?
A) Designing a new product
B) Devising a marketing strategy
C) Ensuring that the office building adheres to safety standards
D) Delivering the finished product to the customer
E) Maintaining demographic and contact details of potential customers
Answer: C
Explanation: Facilities management is responsible for everything from planning new buildings to maintaining them.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
57) An operations manager is most likely to be responsible for ________.
A) developing relationships with potential customers
B) using social media to interact with customers
C) helping to promote products to retailers
D) creating branding and advertising strategies
E) arranging to buy the necessary materials for manufacturing
Answer: E
Explanation: In addition to supervising the actual production activity, operations managers are responsible for a wide range of other strategies and decisions, including purchasing (arranging to buy the necessary materials for manufacturing).
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
58) Creating branding and advertising strategies to communicate with potential customers would fall under the ________ function of a business.
A) human resource
B) accounting
C) logistics
D) marketing
E) research and development
Answer: D
Explanation: Marketing is charged with identifying opportunities in the marketplace. Marketing departments often work with R&D to develop the products to address those opportunities, creating branding and advertising strategies to communicate with potential customers, and setting prices.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
59) The ________ function of a business involves the recruiting, hiring and support of its personnel.
A) operations
B) finance
C) human resources
D) accounting
E) information technology
Answer: C
Explanation: The human resources (HR) function is responsible for recruiting, hiring, developing, and supporting employees.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
60) One of the ________ functions of a business involves working with R&D to develop products to address opportunities in the marketplace and create branding and advertising strategies to communicate with potential customers.
A) operations
B) finance
C) marketing
D) accounting
E) information technology
Answer: C
Explanation: Although the lines separating these three activities are often blurry, generally speaking, marketing is charged with identifying opportunities in the marketplace, working with R&D to develop products to address those opportunities, creating branding and advertising strategies to communicate with potential customers, and setting prices.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
61) The ________ function of a business develops relationships with potential customers and persuades them to buy the company's goods and services.
A) advertising
B) marketing
C) customer support
D) sales
E) distribution
Answer: D
Explanation: The sales function develops relationships with potential customers and persuades customers to buy the company's goods and services.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
62) Research and development fuels new ideas and designs for the company's products and services that allow it to meet customer needs in competitive markets.
Answer: TRUE
Explanation: R&D fuels new ideas and designs for the company's products and services that allow it to meet customer needs in competitive markets.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
63) An employee who is responsible for creating a branding and marketing strategy is most likely to be a part of the firm's operations management team.
Answer: FALSE
Explanation: A person responsible for a company's branding and marketing strategy will be part of strategic management rather than operations management.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
64) In general, accounting managers are responsible for planning, while financial managers are responsible for monitoring and reporting.
Answer: FALSE
Explanation: In general, financial managers are responsible for planning, while accounting managers are responsible for monitoring and reporting.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
65) Companies that sell shares of stock to the public are required to have their financial records audited by an outside accounting firm.
Answer: TRUE
Explanation: Companies that sell shares of stock to the public are required to have their financial records audited by an outside accounting firm.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
66) Describe the six major functional areas in a business enterprise.
Answer: The six major functional areas in a business are:
(1) Research and development (R&D) creates the goods and services that a company can manufacture or perform for its customers. (2) Manufacturing, production, and operations is that part of the company where the firm makes whatever it makes or performs whatever services it performs. (3) The related group of functions in marketing, sales, distribution, and customer support are responsible for identifying market opportunities, crafting the promotional strategies, and making sure customers are supplied and satisfied with their purchases. (4) Finance and accounting plan for the company's financial needs, control spending, and report on financial matters. (5) The human resources (HR) function recruits, hires, develops, and supports employees. (6) A variety of business services provides expertise in law, real estate, and other areas.
Difficulty: 1: Easy
AACSB: Analytical thinking
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
67) Compare and contrast the research and development and the operations functions of a business.
Answer: Products are conceived and designed through research and development (R&D), sometimes known as product design or engineering. It creates the goods and services that a company can manufacture or perform for its customers. Companies can also engage in process R&D to design new and better ways to run their operations.
Manufacturing, production, or operations is that part of the company where the firm makes whatever it makes or performs whatever services it performs. In addition to supervising the actual production activity, operations managers are responsible for a wide range of other strategies and decisions, including purchasing (arranging to buy the necessary materials for manufacturing), logistics (coordinating the incoming flow of materials and the outgoing flow of finished products), and facilities management (everything from planning new buildings to maintaining them).
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
68) ________ can be used to get timely, accurate information to the right people via computer and communication systems.
A) Research and development (R&D)
B) Strategic marketing
C) Product engineering
D) Information technology (IT)
E) Forensic technology (FT)
Answer: D
Explanation: Information technology (IT) systems promote communication and information usage through the company or allow companies to offer new services to their customers.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 1.5: Summarize seven of the most important business professions.
69) ________ verify the financial reports of public companies as required by law.
A) Internal accountants
B) External auditors
C) Credit managers
D) Management accountants
E) Forensic accountants
Answer: B
Explanation: Companies that sell shares of stock to the public are required to have their financial records audited by an outside accounting firm.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
70) ________ encompasses all the people and processes used to create the goods and perform the services that a company sells.
A) Sales and marketing
B) Information technology management
C) Human resources management
D) Operations management
E) Financial management
Answer: D
Explanation: Operations management encompasses all the people and processes used to create the goods and perform the services that a company sells. The work can involve a wide range of tasks and disciplines, including production engineering, assembly, testing, scheduling, quality assurance, information technology, forecasting, finance, logistics, and customer support.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
71) An HR specialist is most likely to be responsible for which of the following activities?
A) Motivate and train diverse workforces
B) Production monitoring
C) Design, implement, and maintain information systems
D) File the annual tax returns for the company
E) Verify the financial reports of public companies
Answer: A
Explanation: HR specialists and managers plan and direct human resource activities that include recruiting, training and development, compensation and benefits, employee and labor relations, and health and safety.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
72) A management accountant is likely to be responsible for which of the following activities?
A) Purchasing raw material for production
B) Assessing the manufacturing costs of new products
C) Determining the prices of products
D) Removing a distributor from the supply chain
E) Determining the money allocated for marketing
Answer: B
Explanation: Management accountants are responsible for collecting, analyzing, and reporting on financial matters—such as analyzing budgets, assessing the manufacturing costs of new products, and preparing state and federal tax returns.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
73) Which of the following positions would be responsible for establishing the long-term financial goals of the company, investing funds, and raising capital?
A) Credit manager
B) Internal auditor
C) Chief information officer
D) Forensic accountant
E) Finance officer
Answer: E
Explanation: Treasurers and finance officers have a more strategic role, establishing long-term financial goals and budgets, investing the firm's funds, and raising capital as needed.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
74) Which of the following is responsible for talent management efforts to ensure the company can compete in its chosen markets?
A) Human resources
B) Operations management
C) Sales
D) Marketing
E) Accounting
Answer: A
Explanation: HR also oversees talent management efforts, making sure the company can attract, develop, and retain people with the types of talent the company needs in order to compete in its chosen markets.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.5: Summarize seven of the most important business professions.
75) Because of the increasing importance of the field, most companies now employ ________ to oversee the development of IT strategies for the organization.
A) web designers
B) chief information officers
C) systems specialists
D) Gig specialists
E) Internal auditors
Answer: B
Explanation: Reflecting IT's strategic importance, many midsize and large companies now have a chief information officer (CIO) position at the executive level to plot IT strategy.
Difficulty: 1: Easy
AACSB: Information technology
LO: 1.5: Summarize seven of the most important business professions.
76) Which of the following verify the efforts of an organization's accounting department and look for ways to improve efficiency and cost-effectiveness?
A) Public accountants
B) Management accountants
C) Internal auditors
D) Financial analysts
E) Forensic accountants
Answer: C
Explanation: Internal auditors verify the work of the company's accounting effort and look for opportunities to improve efficiency and cost-effectiveness.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
77) Who are those responsible for investigating financial crimes?
A) Financial managers
B) Controllers
C) External auditors
D) Forensic accountants
E) Treasurers
Answer: D
Explanation: Forensic accountants investigate financial crimes.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
78) Who has the strategic, long-term responsibility for raising funds for an organization when needed?
A) Financial managers
B) Cash managers
C) Credit managers
D) Controllers
E) Finance officers
Answer: E
Explanation: Treasurers and finance officers have a more strategic role, establishing long-term financial goals and budgets, investing the firm's funds, and raising capital as needed.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
79) The chief information officer (CIO) is responsible for the preparation of income statements and balance sheets.
Answer: FALSE
Explanation: Accountants and controllers are responsible for the preparation of income statements, balance sheets, and other financial reports.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
80) Internal auditors verify the work of the company's accounting effort and look for opportunities to improve efficiency and cost effectiveness.
Answer: TRUE
Explanation: Internal auditors verify the work of the company's accounting effort and look for opportunities to improve efficiency and cost effectiveness.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
81) Unlike accounting tasks, the work of financial managers is generally kept "in house," particularly in midsize and large companies.
Answer: TRUE
Explanation: Unlike accounting tasks, for which there is a long tradition of outsourcing, the work of financial managers is generally kept in-house, particularly in midsize and large companies. The work of a financial manager touches every part of the company, so a broad understanding of the various functional areas in business is a key attribute for this position.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
82) What are the functions of HR specialists and managers?
Answer: HR specialists and managers plan and direct human resource activities that include recruiting, training and development, compensation and benefits, employee and labor relations, and health and safety. Additionally, HR managers develop and implement human resources systems and practices to accommodate a firm's strategy and to motivate and manage diverse workforces. In the past, HR was seen by many as a lower-level function concerned mostly with processing employee records and other tactical duties. However, in many companies, the HR function is becoming more strategic and focused on the global competition to find, attract, and keep the best talent on the market.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.5: Summarize seven of the most important business professions.
83) ________ is the quality of performing at a high level and conducting oneself with purpose and pride.
A) Business mindset
B) Professionalism
C) Job enrichment
D) Positive reinforcement
E) Etiquette
Answer: B
Explanation: Professionalism is the quality of performing at a high level and conducting oneself with purpose and pride.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.6: Identify six components of professionalism.
84) Which of the following activities is most likely to be considered unprofessional?
A) Viewing constant change as a positive thing, as a way to avoid stagnation and boredom
B) Being conservative with commitments
C) Helping others in the team to improve their performance
D) Posting critical comments regarding the employer in a personal blog
E) Providing practical information, when required
Answer: D
Explanation: Professionals don't talk negatively to their employers in front of customers or in their personal blogs. When they have a problem, they solve it; they don't share it.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify six components of professionalism.
85) The expected norms of behavior in a particular situation are referred to as ________.
A) etiquette
B) dependability
C) expectancy
D) energy
E) accountability
Answer: A
Explanation: Etiquette refers to the expected norms of behavior in any particular situation.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify six components of professionalism.
86) Performing at a high level, and continuing to improve is an indication of ________ in one's pursuit of professionalism.
A) being a team player
B) making ethical decisions
C) being dependable and accountable
D) maintaining a confident, positive outlook
E) striving to excel
Answer: E
Explanation: Not only do you have an ethical obligation to give your employer and your customers your best effort, but excelling at each level in your career is the best way to keep climbing up to new positions of responsibility.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify six components of professionalism.
87) What should be done to improve communications and ensure information is useful and adapted to the audience's specific needs?
A) Provide practical information
B) Limit access to all data and release only what is necessary
C) Present opinions in a forceful manner so they appear to be fact based
D) Provide all detail possible in each message
E) Make it clear how you will benefit from the audiences response to your message
Answer: A
Explanation: Give people useful information that is adapted to their specific needs.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.6: Identify six components of professionalism.
88) Improving your communication skills may be one of the most important steps you can take to ________.
A) establish yourself as a professional
B) build a strong commitment to ethics
C) have a friendly demeanor
D) be accountable at all times
E) be a team player
Answer: A
Explanation: If you're looking for a surefire way to stand out from your competition and establish yourself as a competent professional, improving your communication skills may be the most important step you can take.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify six components of professionalism.
89) What makes a great team player and is often an indication of management skills?
A) Offering opinions only when asked
B) Being able to make others more effective
C) Making deadlines
D) Showing loyalty to the group at all costs
E) Protecting the reputation of the team
Answer: B
Explanation: In fact, the ability to help others improve their performance is one of the key attributes executives look for when they want to promote people into management.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.6: Identify six components of professionalism.
90) Dependability includes meeting your commitments, such as staying on schedule and within budgets.
Answer: TRUE
Explanation: Being dependable includes developing a reputation as somebody people can count on. This means meeting your commitments, including staying on schedule and staying within budgets.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.6: Identify six components of professionalism.
91) Etiquette is the quality of performing your job to the best of your ability and conducting yourself with purpose and pride.
Answer: FALSE
Explanation: Etiquette refers to the expected norms of behavior in any particular situation.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.6: Identify six components of professionalism.
92) List the seven key traits of professionalism.
Answer: Professionalism is the quality of performing at a high level and conducting yourself with purpose and pride. True professionals exhibit seven distinct traits: striving to excel, being dependable and accountable, being a team player, communicating effectively, demonstrating a sense of etiquette, making ethical decisions, and maintaining a positive outlook.
Difficulty: 1: Easy
AACSB: Analytical thinking
LO: 1.6: Identify six components of professionalism.
93) Why is being a team player an important aspect of professionalism?
Answer: Professionals know that they are contributors to a larger cause, and that it's not all about them. Great team players know how to make those around them more effective, whether it's lending a hand during crunch time, sharing resources, removing obstacles, making introductions, or offering expertise. Being a team player also means showing loyalty to your organization and protecting your employer's reputation—one of the most important assets any company has. Professionals don't trash their employers in front of customers or in their personal blogs. When they have a problem, they solve it; they don't share it.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify six components of professionalism.
94) Discuss each of the seven guidelines to improve your communication skills.
Answer: First, listen actively. Active listening means making a conscious effort to turn off your own filters and biases to truly hear and understand what someone else is saying. Second, provide practical information. Give people useful information that is adapted to their specific needs. Third, give facts rather than vague impressions. Use concrete language, specific detail, and supporting information that is clear, convincing, accurate, and ethical. Fourth, don't present opinions as facts. If you are offering an opinion, make sure the audience understands that. Fifth, present information in a concise, efficient manner. Audiences appreciate—and respond more positively to—high-efficiency messages. Sixth, clarify expectations and responsibilities. Clearly state what you expect from your readers or listeners and what you can do for them. Seventh, offer compelling, persuasive arguments and recommendations. Make it clear to people how they will benefit from responding to your messages the way you want them to.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify six components of professionalism.
95) Because they fundamentally change the nature of an industry, ________ can be powerful enough to create or destroy entire companies.
A) adaptive technologies
B) disruptive technologies
C) apocryphal technologies
D) incremental technologies
E) innovative technologies
Answer: B
Explanation: Disruptive technologies fundamentally change the nature of an industry. Therefore, they can have sufficient power to create or destroy entire companies.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 1.7: Describe the concepts of disruptive innovation and digital transformation.
96) Which of the following is considered to be so fundamentally different that it can create new professions, companies or entire industries?
A) Hype cycling
B) Disruptive innovation
C) Digital enterprise
D) App generation
E) Digital transformation
Answer: B
Explanation: Disruptive innovation is a development so fundamentally different and far -reaching that it can create new professions, companies, or even entire industries while damaging or destroying others.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 1.7: Describe the concepts of disruptive innovation and digital transformation.
97) Which of the following describes any company who uses digital technology as one of the foundations of its value-creation process?
A) Disruptive organization
B) Digital enterprise
C) Digital transformer
D) Disruptive innovator
E) Digital twin
Answer: B
Explanation: A digital enterprise is any company that uses digital enterprise technologies as one of the foundations of its value-creation processes, regardless of what industry it is in or what products it makes.
Difficulty: 3: Challenging
AACSB: Information technology
LO: 1.7: Describe the concepts of disruptive innovation and digital transformation.
98) Many executives believe it is better to implement digital transformation themselves rather than waiting until other companies force disruption on them.
Answer: TRUE
Explanation: Many executives now believe it is imperative to "disrupt themselves" through digital transformation rather than waiting until other companies force disruption on them.
Digital transformation can incorporate a variety of technologies, including big data, the Internet of Things, cloud computing, social media, mobile apps, AI, robotics, and robotic process automation.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 1.7: Describe the concepts of disruptive innovation and digital transformation.
99) The ability to define and solve problems and form judgements about a situation is referred to as ________.
A) data literacy
B) social responsibility
C) knowledge application
D) critical thinking
E) collaboration
Answer: D
Explanation: In many of the assignments and activities, you will need to define and solve problems and make decisions or form judgments about a particular situation or set of circumstances. These are all critical thinking skills.
Difficulty: 3: Challenging
AACSB: Reflective thinking
LO: 1.8: Identify seven essential business skills that you will have the opportunity to develop during this course.
100) The ability to learn a concept and then apply that knowledge to other challenges is referred to as knowledge application and analysis.
Answer: TRUE
Explanation: The ability to learn a concept and then apply that knowledge to other challenges is a skill that employers value highly.
Difficulty: 2: Moderate
AACSB: Reflective thinking
LO: 1.8: Identify seven essential business skills that you will have the opportunity to develop during this course.
