UNITED STATES ECONOMIC SYSTEMS AND BUSINESS FOUNDATIONS

Question 1

The economic system used in the United States, where private businesses have freedom to operate competitively, for profit, and without significant government controls.

Answer 1

Free Enterprise

Question 2

The practice of actively participating in free enterprise economy by starting new organizations, particularly new businesses. It involves the recognition of opportunities (needs, wants, problems, and challenges) and the use of resources to implement innovative ideas for new, thoughtfully planned ventures.

Answer 2

Entrepreneurship

Question 3

________ are unincorporated businesses. They are also called independent contractors, consultants, or freelancers. There are no forms you need to fill out to start this type of business. The only thing you need to do is report your business income and
expenses on your Form 1040 Schedule C. This is the easiest form of business to set up, and the easiest to dissolve. (An LLC with only a single shareholder, a so-called singlemember LLC, is taxed as a sole proprietor on a Schedule C.)

Answer 3

Sole proprietors

Question 4

________ are incorporated businesses. Every form of business besides the sole proprietor is considered a separate entity, and this often provides a measure of legal and financial protection for the shareholders. The shareholders of _________ have limited liability protection, and ________ have full discretion over the amount of profits they can distribute or retain. ________ are presumed to be for-profit entities, and as such they can have an unlimited number of years with losses. __________ must have at least one shareholder.

Answer 4

Corporations

Question 5

_______ are incorporated businesses. Like corporations, _________ are separate entities from the shareholders. Unlike corporations, ________ must have at least one General Partner who assumes unlimited liability for the business. _________ must have at least two shareholders. _________ distribute all profits and losses to their shareholders without regard for any profits retained by the business for cash flow purposes. (LLCs are taxed as _______, unless they choose to be taxed as corporations.)

Answer 5

Partnerships

Question 6

________ have features similar to a partnership. An ________ must have at least one shareholder, and cannot have more than 100 shareholders. If any shareholder provides services to the business, the ________ must pay that shareholder a reasonable salary. This salary is a separate payment from distributions of profits or losses.

Answer 6

S-Corporations

Question 7

________ are usually formed upon the death of an individual and are designed to provide continuity of the investments and business activities of the deceased individual.

Answer 7

Trusts

Question 8

________ are corporations formed for a charitable, civic, or artistic purpose. _________ are generally exempt from federal and state taxation on their income, and so they are often called “exempt organizations.” ________ have substantial responsibilities for reporting their activities, income, and assets to ensure that they are in compliance with federal and state laws governing charities.

Answer 8

Nonprofits

Question 9

A __________ shows how an organization will execute strategy in order to reach its
goals.

Answer 9

Business plan

Question 10

Typically two to five pages in length, the _______ main objectives are to capture the reader’s attention and create interest in the company. It includes the mission statement of the organization, summarizes its competitive advantages, sales and profit
projections, financial requirements, plans to repay lenders or investors, and the amount of
financial needed to get started.

Answer 10

Executive Summary

Question 11

Outlines a profile of the company (origin of the company, history of the product development, etc.) and the industry in which it operates. This description of the company’s operating environment typically also includes new trends and/or products in the industry, along with the industry’s outlook. The company’s operational procedures,
research and development.

Answer 11

Description of Business

Question 12

Unlike the Description of Business (where product history was revealed), this section is written to
differentiate the organization’s products/services from those of competitors. Specific customer needs are discussed, product life cycles, and future generations of products/services.

Answer 12

Description of Products/Services

Question 13

This section discusses the strengths of the management team (experience, achievements,
etc.) and information about the work force and ownership. An organizational structure is
also laid out, showing how that structure will accomplish set goals. Control and
management systems are also described.

Answer 13

Description of Management and Organizational Structure

Question 14

This section begins the major platform for the sales and marketing plans. Competition, customers, products, and the markets receptiveness to the products/services are discussed in this section. A major discussion involves how the products/services meet a previously unmet need in the marketplace.

Answer 14

Market Analysis

Question 15

This segment explores the methods and activities that will be used to reach revenue goals.
Specific sales programs (customer membership rewards, etc) and marketing plans (ads in
newspaper, sponsorship of community events, etc.) are laid out. Specific revenue outcomes are projected in this section.

Answer 15

Sale and Marketing Plan

Question 16

This is included only if the company is involved in manufacturing products. A serviceoriented
organization or reseller of goods would not have a production plan in their business plan. For organizations that produce goods, this section discusses various options for the making of their mix of products. Included are estimates for costs such as labor and materials.

Answer 16

Production Plan

Question 17

Cash flow requirements and financing options are the focus of this section. Projections of income, expenses, and cash flow (how much money is available and when) are central aspects of the financial plan. A description of the budget and financial controls (systems to keep finances from getting out of control). Very important in this section are the market research and verifiable sales figures that demonstrate intelligent financial projections as
opposed to pulling numbers out of thin air. Revenue projections are monthly for the first two years, annually for years three through eight. If the business plan is written for investors or lenders, the amount of capital needed may be included here or in an “Investors/Raising Capital” section.

Answer 17

Financial Plan

Question 18

Important dates for finances (when capital is needed and when revenue is expected), marketing (when certain initiatives begin and end), and production (production schedules and delivery dates) are outlined in the section.

Answer 18

Implementation Schedule

Question 19

The final section of the business plan details problems and challenges that the organization may face. It also outlines contingency plans for overcoming obstacles that may arise. Specifically, how the company will respond to initiatives of competitors, legal constraints, staffing, and areas of vulnerability.

Answer 19

Contingency Plans

Question 20

Basic elements, like a table of contents and a cover sheet, are always expected. An appendix may include charts or other documentation that supports the business plan.

Answer 20

Final Notes on Business Plans

Question 21

The principal measure of domestic production in the United States, _______ is a measure of
the value of a country’s production of goods and services for a specific period. It is
different from gross national product (GNP) in that is not included net income from foreign
sources. ________ is commonly used as a measure for an economy’s well-being.

Answer 21

Gross Domestic Product

Question 22

________ is calculated in the U.S. as the sum of the four components of aggregate demand:
consumption, investment, government purchases, and net exports. Analysts look at
quarterly figures to determine the direction of the economy.

Answer 22

Gross Domestic Product

Question 23

________ is the process of paying (or collecting) taxes for the government in which your organization exists.

Answer 23

Taxation

Question 24

It is commonly referred to as an increase in price level of goods. The _______ rate is calculated by measuring the change of price via the price index.

Answer 24

Inflation

Question 25

The ________ is measured by three sources: the

consumer _______, producer _______, and the implicit _______.

Answer 25

Price Index

Question 26

The opposite of inflation, ________ means that prices are going down. The prices of goods
go down, the CPI goes down, and _______ is in motion.

Answer 26

Deflation

Question 27

This is the major determiner of the cost of goods and services. Essentially, when supply is greater than demand, the cost of a good or service will decrease. When demand is greater than supply, the cost will increase.

Answer 27

Supply and Demand

Question 28

A key component of supply and demand is _______. If, for example, the number of gallons of milk sold remains the same after prices have increased, milk would be an inelastic good. If, however, the number of gallons sold went down after milk prices increased, it would be elastic.

Answer 28

Elasticity

Question 29

Factors determining ________ are:

1) Tastes, customs, and preferences of a given market.
2) Income level.
3) Quality of goods/services being offered.
4) The availability of a competitor’s goods/services

Answer 29

Demand

Question 30

Factors affecting _______ include:

1) Production capacity.
2) Production costs.
3) Amount of competition in a given market.

Answer 30

Supply

Question 31

_________ involves figuring out the best way to get things done (preferred methods is the official name), followed by educating and evaluating employees by a set of determined standards. The goals of ________ are to eliminate operating costs, improve productivity, increase employee retention, and to get new workers up to speed more quickly. Typically, a software system is involved, which provides labor planning capabilities and the ability to report in detail, performance against standards at multiple
levels.

Answer 31

Labor management

Question 32

1) Determine monthly income from all sources.
2) Determine monthly costs accurately.
3) Record revenues and expenses for the current cost period.
4) Establish monthly estimates for expenses.
5) Track actual expenses as they occur.
6) Automate the process to make it repeatable.

Answer 32

Consumer Budgeting

Question 33

Is it a better value to purchase a 6-pack of cola for $2.40 or buy a 2 liter for $1.09? The ability to convert product amounts (liters to ounces, ounces to lbs., etc.) is an integral part of making ________ . Pricing strategies usually encourage consumers to buy a greater quantity by offering more value at a higher price ($.60 per can of soda or a sixpack
for $2.40, making the cost of each can in the six-pack to be $.40).

Answer 33

Marketplace decisions

Question 34

In 1960, President Kennedy introduced the consumer bill of rights. It states that consumers have:
• The right to safety: to be protected against the marketing of products and services that are hazardous to health or to life.
• The right to be informed: to be protected against fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices, and to be given the facts needed to make informed choices.
• The right to choose: to have available a variety of products and services at competitive prices.
• The right to be heard: to be assured that consumer’s interests will receive full and sympathetic consideration in making government policy, both through the laws passed by legislatures and through regulations passed by administrative bodies.
• The right to education: to have access to programs and information that help consumers make better marketplace decisions.
• The right to redress: to work with established mechanisms in order to have problems corrected and to receive compensation for poor service or for products which do not function properly.

Answer 34

Consumer Rights

Question 35

________ is a high school and college group for students interested in marketing, management, and entrepreneurship. There are statewide, regional, and national competitions.

Answer 35

DECA

Question 36

FBLA is a middle and secondary school organization for students interested in pursuing
business careers. There are statewide, regional, and national competitions in various business topics.

Answer 36

Future Business Leaders of America

Question 37

BPA is a nationwide group for middle school, high school, and college students that promotes strong business leadership skills through nationwide competitive events.

Answer 37

Business Professionals of America

Question 38

_______ provides opportunities for K-12 students to interact with and learn directly from businesses in the community.

Answer 38

Junior Achievement

Question 39

________ is an honor society recognizing achievement in two-year degree business students. Eligibility is restricted to those with a minimum 3.0 GPA and in the top thirty-five percent of their class. _______ was founded in 1970.

Answer 39

Alpha Beta Gamma

Question 40

________ is an honor society for financial service business students. It has inducted over 200,000 students since its creation in 1919.

Answer 40

Beta Alpha

Question 41

________ is an honor society serving all business programs accredited by the Association to Advance Collegiate Schools of Business. Members must be in the top ten percent of their class. Over 500, 000 undergraduate, graduate, and doctoral students have been inducted since its inception in 1913.

Answer 41

Beta Gamma Sigma

Question 42

________ is an honor society for business, management, and administration
students ranking in the top twenty percent of their class.

Answer 42

Sigma Beta Delta

Question 43

Although the education for business has a vocational focus, it was not until the passage of
the _______ that business education received
financial support from the federal government, which impacted and to an extent, defined the role of state and local supervision of business education.

Answer 43

Carl D. Perkins Vocational Education Act of 1963

Question 44

Several reforms and amendments to the Vocational Education Act have taken place over the last forty years. Notably and recently, in October of 1998 the ________ was signed into law, which increased flexibility for states and local school district recipients of these funds, increased accountability for continuous improvement of program performance.

Answer 44

New Carl Perkins Act