Test Bank For A Changing World 8th Edition by O. C. Ferrell

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Test Bank For A Changing World 8th Edition by O. C. Ferrell


 Changing World 8th Edition by O. C. Ferrell  
Test Bank 


Chapter 02

Business Ethics and Social Responsibility


True / False Questions

  1. Business ethics refers to principles and standards that define acceptable conduct in business organizations.
    True    False


  1. Ethics and social responsibility mean the same thing.
    True    False


  1. Nearly all business decisions may be judged as right or wrong, ethical or unethical.
    True    False


  1. The most basic ethical concerns have been formalized through laws and regulations that encourage conformity to societys values and norms.
    True    False


  1. All a business has to do to maintain ethical conduct is to follow the law.
    True    False


  1. Only corporations have to worry about ethics scandals and social responsibility issues.
    True    False





Multiple Choice Questions

  1. The principles and standards that determine acceptable conduct in business are referred to as:
    A. norms
    B. strategies
    C. ethics
    D. laws
    E. rules


  1. Social ______ relates to a businesss impact on society.
    A. responsibility
    B. strategy
    C. ethics
    D. law
    E. rule


  1. The __ Act criminalized securities fraud and stiffened penalties for corporate fraud.
    A. EEOC
    B. Ethical Standards
    C. Internet Standards
    D. Sarbanes-Oxley
    E. SCF


  1. What is considered ethical may differ depending on the __ in which a business operates.
    A. country
    B. culture
    C. trade bloc
    D. hemisphere
    E. industry




  1. Which of the following statements about business ethics is false?
    A. It concerns the impact of a businesss activities on society.
    B. It refers to principles and standards that define acceptable behavior in business organizations.
    C. It relates to an individuals values and moral standards and the resulting business decisions he or she makes.
    D. What is ethical is determined by the public, government regulators, interest groups, competitors, and each individuals personal moral values.
    E. Studying it can help you recognize ethical issues and understand how others make unethical decisions.


  1. Studying business ethics will not necessarily
    A. help you recognize ethical issues.
    B. help you understand the importance of ethical decisions.
    C. inform you concerning the impact of the work group on ethical decisions.
    D. describe the ethical decision-making process.
    E. tell you what you ought to do.


  1. Ethical violations destroy
    A. nothing.
    B. jobs.
    C. trust.
    D. profits.
    E. morale.


  1. The Sarbanes-Oxley Act was passed to
    A. punish those who committed accounting fraud in the late 1990s.
    B. improve corporate profits.
    C. help laid-off employees get their jobs back.
    D. help investors recoup their losses.
    E. help restore confidence in Corporate America.




  1. Which of the following have not been cited as incidents of unethical business activity recently?
    A. Unfair competitive practices in the computer industry
    B. Deceptive advertising of medicines and toys
    C. Accounting fraud
    D. Deceptive advertising of food products
    E. Corporate charitable giving is high


  1. Which of the following statements is false?
    A. Ethical issues are limited to for-profit organizations.
    B. Business ethics goes beyond legal issues.
    C. Ethical conduct builds trust among individuals and in business relationships.
    D. Ethical conflicts may evolve into legal disputes.
    E. Regardless of what an individual feels about a particular action, if society judges it to be unethical, that judgment affects the organizations ability to achieve its objectives.



Essay Questions

  1. What is business ethics?





  1. Choose an issue that has been prominently featured in the news and discuss the ethical implications of this issue. Make sure to define any key terms that you use in your response.








True / False Questions

  1. An ethical issue is an identifiable problem, situation, or opportunity that requires a person or organization to choose from among several actions that may be evaluated as ethical or unethical.
    True    False


  1. The best way to judge the ethics of a decision is to look at it from a managers or employees point of view.
    True    False


  1. The size of the transaction, the history of personal relationships within the particular company, and many other factors may determine whether a customer gift will be judged as ethical.
    True    False


  1. Conflicts of interest are payments, gifts, or special favors intended to influence the outcome of a decision.
    True    False


  1. Ethics is related to the culture in which a business operates.
    True    False


  1. Workplace bullying is an increasing problem.
    True    False




Multiple Choice Questions

  1. The most common ethical issue identified by employees is ____.
    A. bullying
    B. bribery
    C. conflict of interest
    D. cheating
    E. lying


  1. Managers use the ______ of their position to influence employees actions.
    A. authority
    B. power
    C. scope
    D. responsibility
    E. acceptance


  1. __ involves taking someone elses work and presenting it as your own.
    A. Copyright
    B. Photosynthesis
    C. Forecasting
    D. Acceptance
    E. Plagiarism


  1. That businesspeople are expected not to harm customers, clients, and competitors knowingly through deception, misrepresentation, coercion, or discrimination is part of
    A. fairness and honesty.
    B. communications.
    C. conflict of interest.
    D. business relationships.
    E. consumerism.




  1. If the video game marketer Playstation were investigated for allegedly raising prices excessively during the Christmas buying season and thereby manipulating the supply of games available at that time, this was an ethical issue concerned primarily with
    A. conflict of interest.
    B. communications.
    C. fairness and honesty.
    D. cost control.
    E. game rules.


  1. Making claims about dietary supplements or the health benefits of certain unproven ingredients is an issue related to:
    A. conflict of interest.
    B. communications.
    C. product design.
    D. business relationships.
    E. financing.


  1. The warning on cigarette packages about the health implications of smoking is an example of which of the following ethical issues?
    A. Conflict of interest
    B. Fairness and honesty
    C. Communications
    D. Relationships within a business
    E. Environmental issues


  1. The following behavior is an example of ethical consideration within business relationships:
    A. keeping company secrets.
    B. avoiding obligations.
    C. shirking responsibilities.
    D. setting a poor example for others.
    E. offering a bribe.




  1. If a manager pressures a subordinate to engage in activities that he or she may otherwise view as unethical, such as accounting fraud or stealing a competitors secrets, there exists an ethical issue related to
    A. plagiarism.
    B. business relationships.
    C. communications.
    D. fairness and honesty.
    E. conflicts of interest.


  1. If an employee learned of a significant cost-saving idea from a coworker and then informed management of the idea without revealing its true source, then the employee would be involved in
    A. keeping a secret.
    B. career advancement.
    C. plagiarism.
    D. socialism.
    E. egalitarianism.



Essay Questions

  1. What are some of the general ethical issues in business?





  1. How do you recognize an ethical issue in business?








True / False Questions

  1. It is almost always easy to recognize specific ethical issues.
    True    False


  1. Establishing and enforcing ethical standards and policies within business can help reduce unethical behavior by prescribing which activities are acceptable and which are not and by removing the opportunity to act unethically.
    True    False


  1. Without a code of ethics or formal policy on ethics, employees are likely to base their decisions on how their peers and superiors behave.
    True    False


  1. Codes of ethics foster ethical behavior because they expand the opportunity to behave unethically.
    True    False


  1. Ethical decisions in an organization are influenced by three key factors.
    True    False


  1. Codes of ethics are formalized rules and standards that describe what the company expects of its employees.
    True    False





Multiple Choice Questions

  1. Many employees utilize different _____ at work than they do at home.
    A. ethical standards
    B. codes of ethics
    C. conflicts of interest
    D. communication skills
    E. body language


  1. A large number of ____ cases result in dismissal of the employee, even though the government has tried to take steps to protect workers and to encourage reporting of misconduct.
    A. executive
    B. white collar crime
    C. whistleblower
    D. petty theft
    E. federal


  1. __________________ is the extent to which businesses meet the legal, ethical, economic and voluntary responsibilities placed on them by their stakeholders.
    A. A code of conduct
    B. A code of ethics
    C. Egalitarianism
    D. Corporate citizenship
    E. Whistleblowing


  1. A set of formalized rules and standards that describe what a company expects of its employees is called a(n)
    A. code of ethics.
    B. opportunity.
    C. moral philosophy.
    D. guideline.
    E. law.




  1. What is the act of an employee exposing an employers wrongdoing to outsiders?
    A. Fraud
    B. Whistleblowing
    C. Plagiarism
    D. Mayhem
    E. A criminal lawsuit


  1. Codes of ethics foster ethical behavior by all of the following except
    A. expanding the opportunity to behave ethically by providing rewards for following the rules.
    B. limiting the opportunity to behave unethically by providing punishments for violations of the rules and standards.
    C. limiting the opportunity to behave unethically by providing rewards for violations of the rules and standards.
    D. expanding the opportunity to behave ethically by providing punishments for following the rules.
    E. encouraging employees to bend the rules.


  1. Unethical behavior in business can be reduced if management does all of the following except
    A. establish clear policies on unethical behavior.
    B. limit opportunities for unethical behavior.
    C. establish formal rules and procedures.
    D. punish unethical behavior firmly.
    E. depend totally on employees personal ethics.


  1. According to the text, ethical decisions in an organization are influenced by (1) individual moral standards, (2) the influence of managers and co-workers, and (3)
    A. religious values.
    B. informal ethical policies or rules.
    C. opportunity codes and compliance requirements.
    D. family influence.
    E. the founders values.




  1. Which of the following should help reduce the incidence of unethical behavior in an organization?
    A. Understanding that individual moral standards, the influence of managers and coworkers, and opportunity influence ethical behavior
    B. Maximizing ethical conflict in work groups
    C. Expanding opportunity by providing punishments for violations of the rules
    D. Overlooking violations of codes of ethics
    E. All of the above


  1. A code of ethics represents ____________ rules and standards of what a company expects of its employees.
    A. team
    B. impoverished
    C. authority-obedience
    D. formalized
    E. situational



Essay Questions

  1. How can an organization improve ethical behavior?





  1. Why is it increasingly common for organizations to have a code of ethics and compliance programs?








True / False Questions

  1. There are four dimensions of social responsibility: economic, legal, ethical, and voluntary.
    True    False


  1. The concept of social responsibility is universally accepted.
    True    False


  1. One of the dimensions of social responsibility is metaphysical.
    True    False


  1. Increasingly, companies are introducing eco-friendly and socially responsible products to their lines in order to satisfy consumer demand and improve their images.
    True    False


  1. Corporate citizenship is the extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their owners.
    True    False


  1. Voluntary responsibilities are optional activities that promote human welfare or goodwill.
    True    False





Multiple Choice Questions

  1. Obeying the law is a business __________.
    A. right
    B. choice
    C. economic responsibility
    D. legal responsibility
    E. ethical responsibility


  1. Approximately ____ percent of Fortune 500 companies engage in recycling efforts.
    A. 75
    B. 83
    C. 38
    D. 57
    E. 20


  1. Which is NOT a dimension of social responsibility?
    A. Legal
    B. Philosophic
    C. Economic
    D. Voluntary
    E. Ethical


  1. _____ is the activities that individuals, groups, and organizations undertake to protect their rights as consumers.
    A. Consumerism
    B. Civil rights
    C. Protectionism
    D. Conspicuous consumption
    E. Shopping




  1. John F. Kennedys consumer bill of rights outlined four rights: the right to be informed, the right to choose, the right to be heard and:
    A. The right to government regulations
    B. The right to good service
    C. The right to easy credit
    D. The right to shop wherever you want
    E. The right to safety


  1. Being profitable relates to which social responsibility dimension?
    A. Economic
    B. Voluntary
    C. Ethical
    D. Legal
    E. Corporate citizenship


  1. Which of the following is not one of the dimensions of social responsibility?
    A. Voluntary
    B. Economic
    C. Legal
    D. Ethical
    E. Altruistic


  1. Philanthropic contributions made by a business to a charitable organization represent which dimension of social responsibility?
    A. Corporate citizenship
    B. Economic
    C. Legal
    D. Ethical
    E. Voluntary




  1. Consumers vote against firms they view as socially irresponsible by not
    A. boycotting the companys products.
    B. expressing dissatisfaction by protesting.
    C. writing their representatives in Congress.
    D. buying the companys products.
    E. filing complaints with the company.


  1. Studies have found a direct link between social responsibility and _________ in business.
    A. profitability
    B. ethics
    C. declining stock prices
    D. happiness of stakeholders
    E. global Warming



Essay Questions

  1. What are the four dimensions of social responsibility?





  1. Discuss what companies have done to address environmental concerns and to become more sustainable.







True / False Questions

  1. Without employees, a business cannot carry out its goals.
    True    False


  1. Recycling is a business response to employee issues.
    True    False


  1. The right to safety requires that businesses provide a safe place for consumers to shop.
    True    False


  1. A major social responsibility for business is providing equal opportunities for all employees.
    True    False


  1. Americans use over 100 billion plastic bags annually and only recycle 10-20 percent of them.
    True    False


  1. Managers consider social responsibility on an annual basis.
    True    False




Multiple Choice Questions

  1. Water and soil pollution from oil and gas drilling is primarily what type of concern?
    A. Consumer relations
    B. Environmental issues
    C. Community relations
    D. Employee relations
    E. Relations with stockholders


  1. Which of the following is not an area of environmental concern in society today?
    A. Animal rights
    B. Land pollution
    C. Waste disposal
    D. The hard-core unemployed
    E. Business practices that harm endangered wildlife


  1. Laws regarding safety in the workplace are enforced by ___.
    A. FTC
    B. OSHA
    C. EPA
    D. the consumer bill of rights
    E. codes of ethics


  1. One role of the FTCs Bureau of Consumer Protection is to protect consumers from ___________.
    A. ethics
    B. fraud
    C. laws
    D. power
    E. unity of command




  1. Approximately ____ percent of Fortune 500 companies have a written environmental policy.
    A. 3
    B. 23
    C. 43
    D. 63
    E. 83


  1. Corporations contribute more than ______ to environmental and social causes each year.
    A. $2 million
    B. $2 billion
    C. $12 billion
    D. $12 million
    E. No money


  1. The __________ gives consumers the freedom to review complete information about the products they are buying.
    A. right to be informed
    B. right to be heard
    C. right to purchase
    D. right to choose
    E. right to speak out


  1. A major social responsibility for businesses is providing ______ for all employees.
    A. equal wages
    B. equal opportunities
    C. more free time
    D. better healthcare
    E. equal holiday pay




  1. ___________ refers to attaching a positive environmental association on an unsuitable product or service.
    A. Greenwashing
    B. Whitewashing
    C. Environmentalism
    D. Corporate citizenship
    E. Community relations


  1. Many businesses, recognizing that employees lack many basic work skills, are becoming more concerned about the quality of ____ in the United States.
    A. job opportunities
    B. education
    C. philanthropy
    D. management
    E. community relations



Essay Questions

  1. Discuss the sustainability issues managers must confront in dealing with social responsibility issues.





  1. Discuss the community relations issues that concern businesses.







Multiple Choice Questions
Solve the Dilemma: Customer Privacy


  1. What did Jon Barnard do to help Checkers develop a competitive advantage over the competition?
    A. Handed out coupons
    B. Developed a database that improve efficiency
    C. Nothing
    D. He had no competition
    E. Lowered prices


  1. What did Barnard want to do with the information gathered on his customers?
    A. Spy on them
    B. Improve his advertising campaigns
    C. Give the best customers an award for loyalty
    D. Nothing
    E. Change the pizza recipe



Essay Questions

  1. What are some of the ethical issues in giving customers an award for consumption behavior without notifying them first?







  1. Do you see Barnards plan to offer a prize to the highest-consuming customers as a potential violation of privacy? Explain.





  1. How would you handle the situation if you were Barnard?Chapter 04

    Options for Organizing Business


    True / False Questions

    1. A businesss legal form of organization has no effect on how much taxes it pays.
      True    False


    1. Most sole proprietorships focus on manufacturing.
      True    False


    1. Lack of control is a disadvantage of sole proprietorships.
      True    False


    1. Sole proprietorships have the least degree of secrecy.
      True    False


    1. A sole proprietorship has limited sources of funds, which may affect the growth of the business.
      True    False


    1. In the US, men are twice as likely as women to start their own business.
      True    False


    1. If you want to go into business for yourself, the easiest way is a sole proprietorship.
      True    False
    1. Sole proprietorships typically employ fewer than 50 people.
      True    False



    Multiple Choice Questions

    1. Sole proprietorships are taxed as
      A. A partnership
      B. Individual owners income is taxed
      C. Shareholders are taxed
      D. Corporations
      E. Depends on the kind of sole proprietorship formed


    1. One of the most popular and easiest to establish forms of business in the United States is the
      A. partnership.
      B. sole proprietorship.
      C. corporation.
      D. joint venture.
      E. cooperative.


    1. About three-quarters of all businesses in the United States are sole proprietorships, and they earn somewhere around 10 percent of total business income. We may conclude that
      A. the average corporation is small, but earns little income.
      B. the average corporation hires many people, but makes little income.
      C. the average sole proprietorship is large, but earns little income.
      D. there are many sole proprietorships, but their average income is small.
      E. there are few sole proprietorships, and their average income is small.


    1. Which of the following is not a source of funds for a sole proprietorship?
      A. Bank loans
      B. Family members
      C. Personal funds
      D. Selling stock or issuing bonds
      E. Small Business Administration
    1. All of the following are advantages of a sole proprietorship except
      A. ease of formation.
      B. secrecy.
      C. unlimited liability.
      D. control of the business.
      E. limited government regulation.


    1. The following is an advantage of a sole proprietorship:
      A. limited sources of funds
      B. profits are not shared
      C. limited liability
      D. ease of hiring qualified employees
      E. owners role as a generalist


    1. Ruji has realized that she does not like working for others. She wants to open a business in which she will have maximum control and the least interference from government regulation. Which business form might be best for her to use?
      A. Joint venture
      B. Cooperative
      C. Corporation
      D. Partnership
      E. Sole proprietorship


    1. The income earned by sole proprietorships is
      A. taxed twice.
      B. not taxable.
      C. taxed as personal income.
      D. too high.
      E. audited less often than others.
    1. Barber shops, dog kennels, and independent grocery stores are typically
      A. franchises.
      B. nonprofit agencies.
      C. sole proprietorships.
      D. partnerships.
      E. limited liability partnerships.


    1. Which of the following requires owners to perform many functions and possess diverse skills to make decisions?
      A. Corporation
      B. Partnership
      C. Sole proprietorship
      D. Cooperative
      E. Holding company


    1. Which characteristic of a sole proprietorship can be considered both an advantage and a disadvantage?
      A. Taxation
      B. Fund sources
      C. Liability
      D. Continuity
      E. Secrecy


    1. Which of the following forms of business ownership is directly limited by the life of its owner?
      A. Sole proprietorships
      B. Limited partnerships
      C. Corporations
      D. Holding companies
      E. Subsidiaries
    1. A sole proprietorship is a popular form of business because
      A. it is heavily regulated by the government.
      B. it is taxed more than other forms.
      C. it is hard to dissolve.
      D. the proprietor does not have direct control.
      E. it is easy to form.



    Essay Questions

    1. What are the advantages of sole proprietorships over other forms of business organization?





    1. Why is taxation considered both an advantage and a disadvantage of the sole proprietorship organizational form?





    1. What are sole proprietorships? Provide an example.






    True / False Questions

    1. A limited partnership involves a complete sharing in the management of a business.
      True    False


    1. A limited partnership always has at least one general partner, who assumes unlimited liability.
      True    False


    1. In a partnership, if the goals of one partner change, the result may be friction and even legal disputes.
      True    False


    1. All states require partnerships to have articles of partnership.
      True    False


    1. Partnerships have fewer regulatory controls than corporations.
      True    False


    1. In a general partnership, each partner is liable only for the debts he or she incurs.
      True    False


    1. In a partnership, all partners are equally liable.
      True    False



    Multiple Choice Questions

    1. Which of the following is not a disadvantage of forming a partnership?
      A. All partners are responsible for all other partners
      B. Unlimited liability
      C. Fewer regulatory controls than in a corporation
      D. The partnership ends when a partner withdraws or dies
      E. Sources of funds are limited


    1. When are limited partnerships generally used?
      A. When one partner has more money than the others
      B. They are used most of the time for many reasons
      C. Limited partnerships are almost never used
      D. When all partners wish to share liability equally
      E. When the project is risky and the chance of loss is great


    1. Selling interest in a partnership may be difficult because
      A. partnerships are subject to unlimited liability.
      B. partnerships cant issue bonds.
      C. of regulatory controls.
      D. it is difficult to place a value on a share of a partnership.
      E. of double taxation.


    1. Anand has been asked to join a new partnership that is developing wind energy technologies. Because the business is high risk, he does not want to be liable for the firms debts if the project should fail. He could still participate as a
      A. general partner.
      B. limited partner.
      C. silent partner.
      D. working partner.
      E. contributor.
    1. Which form of business organization is the least used in the U.S.?
      A. S-corporation
      B. Franchise
      C. Sole proprietorship
      D. Corporation
      E. Partnership


    1. The legal documents that identify the basic agreements between partners are called
      A. proposals of partnership.
      B. a partnership charter.
      C. agreements of partnership.
      D. articles of partnership.
      E. a partnership contract.


    1. Articles of partnership are required by many states for businesses that have two or more co-owners. The issues covered usually include all of the following except
      A. a statement of what each partner contributes.
      B. how the profits and losses will be divided.
      C. what duties the partners will have.
      D. provisions for leaving the partnership.
      E. classes of stock to be issued.


    1. It is easier to raise funds in a partnership than in a sole proprietorship because
      A. more people means greater earning power and credit.
      B. partners have better organizational control.
      C. banks know them better.
      D. partners have more combined experience.
      E. all of the above.


    1. The decision-making process in a partnership tends to be faster when the partnership is
      A. multifaceted.
      B. small.
      C. foreign.
      D. domestic.
      E. large.
    1. Which of the following is an advantage of a partnership?
      A. Unlimited liability
      B. Life of partnership
      C. Selling a partnership
      D. Limited funding sources
      E. Ease of organization


    1. Which of the following is a disadvantage of a partnership?
      A. Difficulty of selling ownership
      B. Ease of organizing business
      C. Specialization of partners
      D. Relatively fast decision making
      E. Limited government regulation


    1. According to the Internal Revenue Service,
      A. profitable partnerships pay taxes before distributing profits.
      B. partners report their share of profits as personal income.
      C. partners pay no taxes.
      D. partners have the most advantageous tax structure.
      E. all of the above.



    Essay Questions

    1. How does the taxation of partnerships work? How is this different than with a corporation?




    1. Why is it more difficult to value a partnership share than a share of stock in a corporation, for example?





    1. Define the partnership form of business organization. What are its advantages?






    True / False Questions

    1. While corporations account for the majority of businesses in the United States, they represent a small minority of profits.
      True    False


    1. S Corporations are more flexible than traditional C corporations.
      True    False


    1. Corporations cannot be sued.
      True    False


    1. In most states, corporations must have corporation, incorporated, or limited in their names to show that their owners have limited liability.
      True    False
    1. Taking a company public means announcing its creation to the public.
      True    False


    1. The biggest advantage of the corporate form of ownership may be the limited liability of its owners.
      True    False


    1. Preferred stockholders receive dividends before common stockholders and have principle voting rights as well.
      True    False



    Multiple Choice Questions

    1. A corporation doing business outside the state in which it is chartered is known as a(n)
      A. private corporation.
      B. multi-state corporation.
      C. domestic corporation.
      D. alien corporation.
      E. foreign corporation.


    1. Corporations distribute profits to their owners in the form of
      A. tax-free dividends.
      B. interest.
      C. retained earnings.
      D. dividends.
      E. bribes.
    1. In creating a corporation, once the articles of incorporation are filed with the appropriate state office, the state may then issue a
      A. corporate chapter.
      B. corporate contract.
      C. corporate charter.
      D. corporate collaboration.
      E. corporate commentary.


    1. A private corporation is one that
      A. is owned by only a few people and not traded on the open market.
      B. does not pay taxes on its income.
      C. does not hire employees.
      D. can be purchased on the New York Stock Exchange.
      E. all of the above.


    1. The type of corporation represented by organizations such as the National Aeronautics and Space Administration (NASA) and the U.S. Postal Service is called
      A. private.
      B. quasi-private.
      C. public.
      D. quasi-public.
      E. private-public.


    1. Which stockholders usually have the right to vote and control the board of directors?
      A. Preferred
      B. Common
      C. Cumulative preferred
      D. Preemptive
      E. Favorite
    1. The right of common stockholders to have the opportunity to purchase new shares of stock is called a
      A. first offer right.
      B. preemptive right.
      C. stock split right.
      D. profit sharing right.
      E. secondary right.


    1. Common stockholders do not have the right to
      A. vote for the board of directors.
      B. share in profits.
      C. attend the stockholders meetings.
      D. exercise preemptive rights.
      E. receive dividends before preferred stockholders.


    1. An important advantage of a corporation is its
      A. single taxation.
      B. limited liability.
      C. ease of formation.
      D. lack of bureaucracy.
      E. double taxation.


    1. The type of ownership that has the ability to raise capital most easily is a
      A. public corporation.
      B. private corporation.
      C. sole proprietorship.
      D. general partnership.
      E. limited partnership.


    1. Which of the following organizational forms is most expensive to set up?
      A. Sole proprietorship
      B. Limited partnership
      C. General partnership
      D. Cooperative
      E. Corporation
    1. Which of the following forms of business organization restricts the number and type of shareholder?
      A. Sole proprietorship
      B. Co-op
      C. Limited liability company
      D. S-corporation
      E. Partnership


    1. The organizational form that many consider to be a blend of the best characteristics of corporations, partnerships, and sole proprietorships is the
      A. joint venture.
      B. cooperative.
      C. C corporation.
      D. S corporation.
      E. limited liability company.


    1. A written authorization assigning a stockholders voting privilege to another is a
      A. stock sale.
      B. stock certificate.
      C. stock split.
      D. dividend restructuring.
      E. proxy.


    1. Joint ventures are popular in situations that call for
      A. reduced regulations.
      B. cooperation among farmers or ranchers.
      C. unlimited liability.
      D. large investments.
      E. small investments.
    1. All of the following are advantages of a corporation except
      A. limited liability.
      B. lower frequency of taxation.
      C. perpetual life of organization.
      D. ease of transfer of ownership.
      E. external funding sources.


    1. The group of individuals elected by the stockholders to oversee the general operation of a corporation are known as the
      A. middle managers.
      B. top managers.
      C. board of directors.
      D. shareholders.
      E. owners.



    Essay Questions

    1. What is a limited liability company (LLC), and why do some consider it the best form of business ownership?





    1. How do preferred stockholders differ from the common stockholders of a corporation?






    True / False Questions

    1. A conglomerate merger results when two firms in unrelated industries merge.
      True    False


    1. Most tender offers are considered hostile.
      True    False


    1. When firms that make and sell similar products to the same customers merge, it is known as a horizontal merger.
      True    False


    1. A merger occurs when one company buys another by buying its stock.
      True    False


    1. Shark repellant is a method of thwarting a corporate takeover in which management requires a large majority of stockholders to approve the takeover.
      True    False


    1. A leveraged buyout is an organization composed of small businesses that have banded together to reap the benefits of belonging to a larger organization.
      True    False


    1. The government usually will scrutinize high-profile mergers and acquisitions to ensure that they are not creating monopolies.
      True    False



    Multiple Choice Questions

    1. Companies of all sizes grow and improve profitability by
      A. Choosing the right kind of organizational structure
      B. Sticking to domestic markets
      C. Not utilizing new technologies as they become available
      D. Expanding their operations
      E. Creating franchises


    1. When firms that make and sell similar products to the same customers merge, it is known as a
      A. horizontal merger.
      B. vertical merger.
      C. acquisition.
      D. hostile takeover.
      E. poison pill.


    1. When a firm is facing a hostile takeover attempt, it may issue a poison pill, which is
      A. when it fires its board of directors for incompetence.
      B. when the firm allows stockholders to buy up shares of stock at lower than market value.
      C. when the executive suite quits en masse before a takeover.
      D. a term for plummeting stock values.
      E. merely a harshly worded letter to the company attempting to take it over expressing dismay at the maneuver.


    1. When two companies combine to form a new company, it is called a(n)
      A. merger.
      B. acquisition.
      C. tender offer.
      D. leveraged buyout.
      E. white knight.
    1. When a company offers to buy some or all of another companys stock at a premium price, it is a(n)
      A. acquisition.
      B. leveraged buyout.
      C. merger.
      D. hostile offer.
      E. tender offer.


    1. When a group of investors borrows money to buy a company or division, using the companys assets to guarantee the loan, it is called a(n)
      A. acquisition.
      B. merger.
      C. leveraged buyout.
      D. tender offer.
      E. poison pill.


    1. Big City Financial is attempting to avoid a hostile takeover by a corporate raider by allowing stockholders to buy more shares of stock at prices lower than current market value. Which of the following methods is being used to avoid the takeover?
      A. A leveraged buyout
      B. A tender offer
      C. A white knight
      D. A poison pill
      E. Shark repellant


    1. When companies operating at different, but related, levels of an industry merge, it is known as a(n)
      A. vertical merger.
      B. horizontal merger.
      C. acquisition.
      D. leveraged buyout.
      E. diagonal merger.
    1. When discussing corporations, What is a white knight?
      A. A mythical hero in fairy tales
      B. An attempt to fend off a hostile takeover by selling stock at below market value
      C. When management requires the approval of a large majority of shareholders to allow a takeover to happen
      D. A more acceptable firm that is willing to acquire the firm threatened by hostile takeover
      E. A group of investors that has borrowed money to acquire a firm



    Essay Questions

    1. What is a vertical merger and why would a firm attempt one? What are the benefits?





    1. What is a leveraged buyout? What are some of the advantages of mergers and acquisitions?






    Multiple Choice Questions
    Solve the Dilemma: To Incorporate or Not to Incorporate


    1. Bryan thinks their plant resale company should be a corporation because
      A. it is cheaper.
      B. all good businesses are corporations.
      C. they would have limited liability and seem larger.
      D. the other forms of corporation are not valid in their case.
      E. Bryan does not think the company should be a corporation.


    1. Thomas thinks that organizing as a partnership would be best because
      A. it is the most complicated to form.
      B. they are a small company and do not need to be a corporation.
      C. it gives them limited liability.
      D. it would allow them to rely on their own financial resources and talents.
      E. Thomas actually thinks that sole proprietorship would be best.



    Essay Questions

    1. What are some of the advantages and disadvantages of Thomas and Bryan forming a corporation?




    1. What are the advantages and disadvantages of their forming a partnership?





    1. Which organizational form do you think would be best for Thomas and Bryans company and why?Chapter 05

      Small Business, Entrepreneurship, and Franchising


      True / False Questions

      1. Entrepreneurship is the process of creating and managing a business to achieve desired objectives.
        True    False


      1. It is difficult to define small business because smallness is relative.
        True    False


      1. Any business that is independently owned and operated can be classified as a small business.
        True    False


      1. The Small Business Administration offers managerial and financial assistance to small businesses.
        True    False


      1. The entrepreneurship movement is declining because of technological advances.
        True    False



      Multiple Choice Questions

      1. Of minority groups in the United States, ________ own the most small businesses.
        A. Asians
        B. African Americans
        C. American Indians
        D. Hispanics
        E. Pacific Islanders



      1. ________ has helped small businesses compete with larger businesses.
        A. Well-managed inventory
        B. Friendly customer service
        C. Technology
        D. Good management
        E. A diverse workforce


      1. Your textbook uses the term small business to refer to an owner-managed business that employs not more than
        A. 100 people.
        B. 500 people.
        C. 15,000 people.
        D. 25 people.
        E. 1,000 people.


      1. Which of the following is not part of the definition of a small business?
        A. It employs more than 500 employees.
        B. It employs fewer than 500 employees.
        C. It is independently owned and operated.
        D. It is not dominant in its field.
        E. All of the above are part of the definition.


      1. The Small Business Administration
        A. was established by the U.S. Chamber of Commerce to encourage the entrepreneurial spirit.
        B. is an independent agency of the federal government to provide managerial and financial assistance to small businesses.
        C. is a subsidiary of the Better Business Bureau.
        D. is a division of the federal government that is responsible for ensuring that newly formed businesses adhere to the law.
        E. is a U.S. Congressional agency that fosters the establishment of new businesses.



      1. Which of the following groups is most rapidly increasing their presence in the business world?
        A. Women
        B. Minorities
        C. White males
        D. People under 30


      1. Which of the following is an advantage of a small business?
        A. Greater flexibility to change.
        B. Highly trained staff.
        C. Better products.
        D. More diverse employees.
        E. Small businesses have not advantages over large ones.



      Essay Questions

      1. What is a small business?





      1. Why are minority-owned and women-owned small businesses growing so rapidly in the United States?







      True / False Questions

      1. In recent years, small businesses generated very few new jobs in the U.S.
        True    False


      1. Retailing, services, manufacturing, and high technology are attractive to entrepreneurs because these fields tend to be relatively easy to enter and require low initial financing.
        True    False


      1. Retailers purchase goods and resell them to consumers and some distributors.
        True    False


      1. People who operate service businesses are almost never considered to be retailers.
        True    False


      1. A number of very successful high technology businesses began as small entrepreneurial ventures.
        True    False



      Multiple Choice Questions

      1. The majority of all new jobs created in the United States in recent years were generated by
        A. medium businesses.
        B. small businesses.
        C. large businesses.
        D. corporations.
        E. state governments.



      1. Perhaps one of the most significant strengths of small businesses is
        A. their ability to innovate and bring significant changes and benefits to customers.
        B. the entrepreneurial spirit they foster.
        C. the encouragement they receive from larger businesses.
        D. the competition they encourage.
        E. the ease of starting one.


      1. Which of the following fields are most attractive to small businesses?
        A. Wholesaling, retailing, and services
        B. Retailing, distribution, and services
        C. Retailing and wholesaling, services, manufacturing, and high technology
        D. Wholesaling, services, and high technology
        E. Services, distribution, and high technology


      1. Which of the following is not a reason why small businesses choose to become retailers?
        A. Starting a retail business is relatively easy.
        B. Retailing does not require a large capital investment.
        C. Retailing requires a large capital investment.
        D. Gaining knowledge and experience in retailing is relatively easy.
        E. The owner can capitalize on personal expertise or interests.


      1. In the context of starting a new business, a retailer differs from a manufacturer in that the retailer is less likely to make a heavy investment in
        A. equipment and distribution systems.
        B. space.
        C. bookkeeping.
        D. stationery.
        E. advertising.



      1. Many service businesses are considered retailers because they
        A. sell small quantities of goods.
        B. sell their services to consumers.
        C. sell from a single store location.
        D. open their businesses for the same hours that most retailers are open.
        E. employ only a small number of people.


      1. The ______ sector accounts for the majority of jobs in the United States.
        A. manufacturing
        B. retail
        C. export
        D. wholesale
        E. service



      Essay Questions

      1. How important is small business to the U.S. economy?







      True / False Questions

      1. Relatively low start-up costs are an advantage of a small business.
        True    False


      1. Small businesses cannot be operated from an individuals home.
        True    False


      1. The ability to develop a reputation for quality and service is an advantage of a small business.
        True    False


      1. Targeting small niches or product needs is a dangerous strategy for a small business to follow.
        True    False



      Multiple Choice Questions

      1. Small businesses usually only have one layer of management, making them more ______ and able to adapt to market demands.
        A. flexible
        B. reputable
        C. expensive
        D. independent
        E. inefficient



      1. One of the major reasons people want to own and operate their own business is to
        A. make a fortune.
        B. be their own boss.
        C. have complete freedom.
        D. have an easy life.
        E. eliminate all pressure.


      1. A small businesss ability to focus on narrow niches can help it develop
        A. high blood pressure.
        B. lower costs.
        C. higher costs.
        D. flexibility.
        E. an enviable reputation for quality and service.


      1. Which of the following is an advantage of small-business ownership?
        A. Lower cost of formation
        B. High stress level
        C. High failure rate
        D. Lack of flexibility
        E. Poor reputation


      1. Which of the following is not an advantage of small-business ownership?
        A. Lower cost of formation
        B. Flexibility in decision-making
        C. Ability to focus on specific groups of customers
        D. Over-optimism
        E. Ability to gain a solid reputation



      1. One advantage that small businesses have over large businesses is that they
        A. are better able to focus on a few key customers.
        B. have well-defined goals and objectives.
        C. can arrange financial help easily because their capital needs are much smaller.
        D. know what they want to do and have the ability to do it.
        E. have specialized knowledge about the various areas of business concern.


      1. When market conditions change rapidly, a small business usually has fewer layers of management to work through in making decisions. This advantage of small business is
        A. focus.
        B. flexibility.
        C. reputation.
        D. hierarchical organization.
        E. standardization.



      Essay Questions

      1. What are some of the advantages of small-business ownership?






      True / False Questions

      1. Small businesses have a high success rate.
        True    False


      1. Managerial inexperience can lead to business failure.
        True    False



      1. The shortest path to small-business failure is undercapitalization.
        True    False


      1. Insufficient funds to withstand slow sales may cause a small business to fail.
        True    False



      Multiple Choice Questions

      1. Worries about new equipment, expanding inventory, rent increases, competition, changing market conditions, and the like may contribute to
        A. overoptimism.
        B. a high stress level.
        C. a high failure rate.
        D. undercapitalization.
        E. a low stress level.


      1. Although some businesses are less risky than others, overall the financial risks of running a small business are
        A. very low.
        B. moderate.
        C. insurmountable.
        D. low.
        E. very high.


      1. Which of the following is a disadvantage of small-business ownership?
        A. Flexibility
        B. Low stress level
        C. High failure rate
        D. Low failure rate
        E. Focus



      1. All of the following concerns contribute to high stress levels for small-business owners except
        A. rent increases.
        B. changing market demand.
        C. competition.
        D. expanding inventory.
        E. reputation.


      1. Small business success
        A. rarely lasts more than two years.
        B. is not guaranteed.
        C. is not really attainable.
        D. happens only in the United States.
        E. is a sure thing.


      1. Which of the following is not a common cause of small business failure?
        A. Poor business concept
        B. Managerial inexperience
        C. Entrepreneurial vision
        D. Inability to cope with growth
        E. Undercapitalization


      1. The lack of funds to operate a business normally is called
        A. discounting.
        B. creative financing.
        C. financial pessimism.
        D. undercapitalization.
        E. overcapitalization.




      Essay Questions

      1. Why do small businesses have a high failure rate?





      1. What is undercapitalization, and why would it contribute to the failure of a small business?






      True / False Questions<

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