Test 1 Study Prep

Question 1

There are various forms of stakeholders. Can you name 6?

Answer 1

Stockholders, Customers, Surrounding Community, Environmentalists, Dealers, Employees, Government Leaders, Suppliers, Media, Bankers

Question 2

What are the 5 factors of production?

Answer 2

Land, Labor, Capital, Entrepreneurship, Knowledge

Question 3

What are 5 factors that affect the business environment?

Answer 3

The economic and legal environment, the technological environment, the competitive environment, the social environment, the global business environment

Question 4

What is demography?

Answer 4

Demography is the statistical study of the human population with regards to its size, density, and other characteristics, such as age, race, gender, and income.

Question 5

Define macroeconomis

Answer 5

The study of how the whole economy of a nation operates

Question 6

Define microeconomics

Answer 6

The study of the behavior of people and organziations for particular products and service

Question 7

Who is the father of Capitalism?

Answer 7

Adam Smith, a Scottish economist, the author of The Wealth of Nations, published in 1776.

Question 8

Who is the father of Communism?

Answer 8

Karl Marx, a German philosopher, who was prominent in the 1840’s.

Question 9

What is the invisible hand theory?

Answer 9

A theory that self-directed gain can inadvertently result in economic and social benefits for others through the production of needed goods, services, and ideas.

Question 10

What are the four basic rights for capitalism?

Answer 10

The right to own private property, The right to own a business and keep all that business’s property, the right to freedom of competition, the right to freedom of choice

Question 11

What the three key economic indicators?

Answer 11

The GDP (Gross Domestic Product), Unemployment Rate, Price Indexes (Inflation)

Question 12

What are the four stages of the business cycle?

Answer 12

The BOOM, the Recession, the Depression, the Recovery

Question 13

What is monetary policy?

Answer 13

The management of the money supply and the interest rates by the Federal Reserve Bank

Question 14

What is fiscal policy?

Answer 14

The federal government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending.

Question 15

What is the difference between importing and exporting?

Answer 15

Importing is buying products from other countries, Exporting is selling goods to other countries.

Question 16

What is the difference between a comparative advantage and an absolute advantage?

Answer 16

A comparative advantage is when a country should sell to other countries those products it produces most effectively and efficiently, and buy products from other countries it cannot produce as effectively and efficiently. An absolute advantage in an instance where a country can produce a specific product more efficiently than all other countries.

Question 17

What is the balance of trade?

Answer 17

The total value of a nation’s exports compared to its imports measured over a particular period.

Question 18

What is the balance of payments?

Answer 18

The difference between money coming in a country (from exports) and money leaving the country (from imports) , plus money flows coming into or leaving a country from other factors (tourism, foreign aid, military expenditures, foreign investment)

Question 19

What is dumping?

Answer 19

Selling products in a foreign country at lower prices than those charged in the producing country.

Question 20

What are the 6 strategies for reaching global markets? Which 3 are on the LEAST end of the continuum? Which 3 are on the MOST end? (In terms of commitment, control, risk, and profit potential)

Answer 20

The 3 on the least continuum, in order, are licensing, exporting, franchising.
The 3 on the most spectrum , in order, foreign direct investment, international joint ventures and strategic alliances, and contract manufacturing.

Question 21

What is embargo?

Answer 21

A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.

Question 22

What are tariffs?

Answer 22

Taxes on imports, making imported goods more expensive to buy.

Question 23

What is trade protection?

Answer 23

The use of government regulations to limit the import of goods and services.

Question 24

What is the GATT?

Answer 24

GATT = General Agreements on Tariffs and Trade
A global forum formed in 1948 from government leaders of 23 different nations for the purpose of reducing trade restrictions on goods, services, ideas, and cultural programs.

Question 25

What are common markets? Which common market is the least desirable?

Answer 25

A common market is a regional group of countries with a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members. The OPEC (The Organization of the Petroleum Exporting Countries) is least desirable because countries who are not members must import oil and are opposed by what is essentially an absolute advantage.

Question 26

What are the three questions of ethics?

Answer 26

Is it legal?
Is it balanced?
How would it make you feel?

Question 27

What are five reasons why a company should be ethical?

Answer 27

-Reputation
-Retain customers
-Avoid lawsuits
-Retain employees
-Avoid government interference

Question 28

What are the two different codes of ethics?

Answer 28

Integrity-based and Compliance-based.

Question 29

What are 6 steps to improve ethics in the United States?

Answer 29

-Have top management involved
-Expectations of ethical behavior from senior management
-Proper training
-Ethics office
-Compliance from Outside suppliers about the ethics programs
-Serious penalties enforced with timely action

Question 30

What is Corporate Social Responsibility?

Answer 30

the concern businesses have for the welfare of society, not just for their owners.

Question 31

What are the four dimensions of the social performance of a company?

Answer 31

Corporate philanthropy, Corporate Social initiatives, corporate responsibility, corporate policy.

Question 32

What were the four proposed rights of consumers under President JFK?

Answer 32

-The right to safety
-the right to be informed
-the right to choose
-the right to be heard

Question 33

What is insider trading?

Answer 33

the use of private company information to further insiders’ own fortunes or those of family or friends

Question 34

What is a social audit?

Answer 34

A systematic evaluation of an organization’s progress toward implementing socially responsible and responsive programs.

Question 35

List 5 types of groups that serve as watchdogs to monitor how well companies enforce their ethical and social responsibility policies

Answer 35

-Soically conscious invesotrs
-Socially conscious research organizations
-Environmentalists
-Union officials
-Customers

Question 36

What are the advantages of a sole proprietorship? What are the disadvantages?

Answer 36

Advantages are ease of starting and ending the business, the ability to be your own boss, pride of ownership, leaving a legacy, retention of company profits, no special taxes. Disadvantages are unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span.

Question 37

What are the advantages of a partnership? What are the disadvantages?

Answer 37

Advantages include more financial resources, shared management and pooled/complementary skills and knowledge,longer survival, no special taxes. Disadvantages include unlimited liability, division of profits, disagreement among partners, difficulty of termination

Question 38

What are the advantages of a corporation? What are the disadvantages of a corporation?

Answer 38

Advantages include limited liability, ability to raise money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management. Disadvantages include the initial cost, extensive paperwork, double taxation, two tax returns, size, difficulty of termination., and possible conflict with stakeholders and board of directors.

Question 39

What four qualifications must be met for a company to operate as a S-Corporation?

Answer 39

-No more than 100 shareholders
-Shareholders must be U.S. citizens
-Have only ONE class of stock
-Derive no more than 25% of income from passive sources.

Question 40

What are the advantages of an LLC? What are the disadvantages?

Answer 40

Advantages include Limited liability, choice of taxation, flexible ownership rate, flexible ownership rules, flexible distribution of profits and losses, operating flexibility. The disadvantages include no stock, fewer incentives, taxes, paperwork.

Question 41

What is a vertical merger?

Answer 41

When two firms who are operating in different stages of related businesses join together.

Question 42

What is a horizontal merger?

Answer 42

When two firms in the same industry join together to diversify or expand their products

Question 43

What is a conglomerate merger?

Answer 43

When two firms in completely unrelated industries unite to diversify business operations and investments

Question 44

What is a leverage buyout?

Answer 44

An attempt by employees, management, or a group pf private investors to buy out the stockholders in a company, primarily by borrowing the necessary funds.

Question 45

What is a franchise agreement?

Answer 45

An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others.

Question 46

What is a cooperative?

Answer 46

An organization that is owned and controlled by the people who use it - producers, consumers, or workers with similar needs to pool their resources for mutual gain.