Final Exam Study Guide Business

7/27/2019 Final Exam Study Guide Business

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Chapter 1

Explain the people and activities involved in business.

Owners put up the resources--money or credit--to start a business.Employees are responsible for the work that goes on within a business.Owners can manage the business themselves or hire managers toaccomplish its tasks. A business's major role is to satisfy its customers.

There are forces beyond an organization's control--such as legal andregulatory forces, the economy, competition, technology, socialresponsibility and ethics--all affect operations.

Management involves coordinating employees' actions to achieve thefirm's goals; organizing people to work efficiently; motivating them toachieve the business's goals; and acquiring, developing, and usingresources effectively and efficiently. In essence, managers plan, organize,staff, and control the tasks required to carry out the work of the company.

Marketing includes all the activities designed to provide goods andservices that satisfy consumers' needs and wants. Marketers gatherinformation to determine what customers want and then use promotion--advertising, personal selling, sales promotion, and publicity--tocommunicate the benefits and advantages of their products.Finance refers to activities concerned with obtaining money and using iteffectively by the owners.


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What are the three questions that an economic system mustanswer?

o What goods and services, and how much of each, will satisfyconsumers needs?

Concerns allocation of resources among alternatives, i.e. theeconomy must allocate the varieties of goods and serviceswhich yield the greatest satisfaction to the consumers.

o How will goods and services be produced, who will producethem, and with what resources will they be produced?This deals with utilizing the most efficient process to producethe goods and services. Production is said to be inefficientwhen it is possible to reallocate resources and, as a result,produce more of at least one good without producing less ofany other good.

oHow are the goods and services to be distributed toconsumers?The ideal distribution of goods and services is equaldistribution among all members in the economy. However, inthe real world this is never achieved.

Chapter 2

What are the 6 main ethical issues in business?o Misuse of company resources is the most commonly observed

misconduct (Time theft, use of personal email and socialnetworking sites at work is a growing problem, stealing officesupplies, unauthorized use of equipment and software).

o Abusive and intimidating behavior (spreading rumors, insults,discriminate by gender, race, or age).

o Conflict of interest. Bribesrepresent a conflict of interestbecause they benefit an individual at the expense of anorganization or society.

o Fairness and honesty are at the heart of business ethics (Howemployees use resources; no deceit, coercion, or

misrepresentation; fair competition; disclosure of potentialharm caused by products).

o Communications (false and misleading advertising,deceptive personal selling tactics, lying, and productlabeling)

o Business Relationships are relationships with customers,suppliers and co-workers (ethical behavior within a business is


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important, keeping company secrets, meeting obligationsand responsibilities, avoiding undue pressure).Managers have the responsibility to create ethical workenvironment and provide a positive example.Plagiarism--taking someone else's work and presenting it as

your own--is another issue related to business relationship

What are the 4 dimensions of social responsibility?o Voluntary Responsibilities (being a good corporate citizen;

contributing to the community and quality of l ife)

o Ethical Responsibilities (being ethical; doing what is right, just,and fair; avoiding harm)

o Legal Responsibilities (obeying the lawsocietys codificationof right and wrong; playing by the rules of the game)

oEconomic Responsibilities (being profitable)

Chapter 3

What are some social and cultural barriers in international business?o Cultural differences include differences in spoken and written

language (true meaning misinterpreted and lost)

o Differences in body language (nonverbal through gestures,posture, and facial expressions) and personal space

(distance at which a person feels comfortable)o Family Roles also influence marketing activities (alcohol

Muslim countries)

o Perception of time (business meeting late)o Religious holidays and local costumes of the host country

(Islamic countriesbreaks while working to pray)o Metric system (lack of uniformity creates problems for both

buyers and sellers in the international marketplace)

What are the differences between balance of trade and balance ofpayments?

Balance of trade: The difference in value between a nationsexports and its imports.A nation that exports more than it imports has a favorable balanceof trade.Because the United States imports more products than it exports, ithas a negative balance of trade, or trade deficit. The trade deficit


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fluctuates according to such factors as the health of the UnitedStates and other economies, productivity, perceived quality, andexchange rates. Trade deficits may contribute to the failure ofbusinesses, the loss of jobs, and a lowered standard of living.Balance of payment: The difference between the flow of money

into and out of a country and includes:o Countrys balance of tradeo Foreign investmentso Foreign aido Foreign loanso Military expenditureso Money spent by tourists

When a country has a trade deficit, more money flows out of thecountry than into it. If more money flows out of the country than intoit from tourism and other sources, the country may experience

declining production and higher unemployment, because there isless money available for spending.

Chapter 4

What are the difference forms of ownership and how are they used?


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What are the differences between preferred stock and commonstock?

Preferred stock: A special type of stock whose owners, though notgenerally having a say in running the company, have a claim toprofits before other stockholders do.

Common stock: Stock whose owners have voting rights in thecorporation, yet do not receive preferential treatment regardingdividends.


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Chapter 5

Advantages and disadvantages of a small businessAdvantages Disadvantages

Independence- Being your own boss- Dont fit the corporate mold- Freedom to choose whom theywork with.- Work at home

High stress level- Multitasking results in long hours

Costs

- Less money to start and maintain- Family volunteers to work to savemoney

High failure rate

50% of all new businesses fail within the first 5

years

- Poor business concept

- Burdens imposed by government regulationFlexibility

- Adapt to changing marketdemands- Develop and introduce a newproduct in a shorter time

- Undercapitalization

Lack of funds to operate normally

Seasonal variations in sales which make cashtight and few businesses make money from thestart.

Focus

- Efforts in a defined market niche- Avoid competition from largerfirms, helping them to grow intostronger companies

- Managerial inexperience or incompetence

No knowledge or experience to manage agrowing business effectively

Reputation

- Quality and service- Inability to cope with growth

Growth often requires the owner to give up acertain amount of direct authority

What is the undercapitalization for a small business?Undercapitalization: the lack of funds to operate a business normally. Itis important for the success or failure of a small business in order tohave a good cash flow.


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Chapter 6

What are the 5 functions of management?o Planning: Determining the organizations objectives and

deciding how to achieve them.o Organizing: Structuring of resources and activities to

accomplish objectives in an efficient and effective manner.

o Staffing: Hiring qualified people to carry out the work of theorganization.

o Directing: Motivating and leading employees to achieveorganizational objectives.

o Controlling: Evaluating and correcting activities to keep theorganization on course.

What is the systematic 6 step approach in the decision makingprocess?

o Recognize and define the decision situation which may beeither positive or negative. The situation must be carefullydefined before management can make a decision.

o Develop options, both standard and creative. As a generalrule, more time and expertise are devoted to thedevelopment stage of decision making when the decision isof major importance.

o Analyze options involves analyzing the practicality andappropriateness of each option. Management shouldconsider both the consequences of each option andwhether the options adequately address the decisionsituation.

o Select the best option from among the list of options. This isoften a subjective process because many situations do notlend themselves to mathematical analysis.

o Implement the decision. Effective implementation requiresplanning. Additionally, management should anticipateresistance from people within the organization and be ready

to deal with unexpected consequences.o Monitor de consequences Did the decision accomplish the

desired result? If not, management must analyze the situationto find out if the decision was the wrong one, if the situationchanged, or if some other option should be implemented.The decision situation may have been incorrectly defined, orthe results may not have had time to show up.


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Chapter 7

What is organizational culture and how is it expressed?Organizational culture is a firms shared values, beliefs, traditions,

philosophies, rules, and role models for behavior.

A firms culture may be expressed formally through its missionstatement, codes of ethics, memos, manuals, and ceremonies, butit is commonly expressed informally by including dress codes, workhabits, extracurricular activities, and stories.

Explain how teamwork and communication delegates tasks andresponsibilities.

Delegation of authority is the process of giving employees not onlytasks, but also the power to make commitments, use resources, andtake whatever actions are necessary to carry out those tasks.Delegation gives a responsibility, or obligation, on employees tocarry out assigned tasks satisfactorily and be held accountable forthe proper execution of work.The principle of accountability means that employees who acceptan assignment and the authority to carry it out are answerable to asuperior for the outcome.

Chapter 8

Assess the importance of quality in operations management.Controlling quality is another critical element in production andoperations management because defective products can harm afirm. Quality reflects the degree to which a good or service meetsthe demands and requirements of customers. Determining qualitycan be difficult because it depends on customers' perceptions ofhow well the product meets or exceeds their expectations. Quality

control refers to the processes an organization uses to maintain itsestablished quality standards. Companies employing total qualitymanagement (TQM) programs know that quality control must beincorporated throughout the transformation process, from the initialplans to develop a specific product through the facility planningstages to the actual manufacture of the product. One methodthrough which many companies have tried to improve qualityisstatistical process control,a system in which management
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collects and analyzes information about the production process topinpoint quality problems in the production system.

Manufacturing and service-providing firms must set productspecifications and quality standards. ISO 9000 is a series of quality

assurance standards designed to ensure consistent product qualityunder many conditions.

What is sustainability and how does it impact in manufacturing?Pressure has increased for manufacturing and production systemsto reduce waste and improve sustainability. Consumers prefer topurchase goods that were manufactured in an environmentally-friendly facility. Sustainability deals with reducing the consumptionof resources and the long-term well-being of the planet, including

natural entities and the interactions of individuals, organizations,and businesses.

Chapter 9

List Maslows hierarchy of needsMaslow's hierarchy shows the order in which people strive to satisfythese needs. Abraham Maslow theorized that humans have fivebasic needs:

o Self-Actualization implies being the bestthat one can be.

o Esteem Needs relate to self-respect andrespect from others.

o Social Needs the need for love,companionship, and friendship--thedesire for acceptance by others.

o Security Needs the need to protectoneself from physical and economicharm.

o Physiological Needs the most basic andfirst needs to be satisfied, are theessentials for living--water, food, shelter, and clothing.

Maslow's theory maintains that the more basic needs at the bottomof the hierarchy must be satisfied before higher-level goals arepursued. It also suggests that employees will be motivated tocontribute to organizational goals only if they are able first to satisfytheir physiological, security, and social needs through their work.


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Explain the motivation process.A person who recognizes or feels a need ismotivated to take action to satisfy the needand achieve a goal.

When a need exists, an individual engages ingoal-directed behavior designed to satisfythat need.Human relations is concerned with the needsof employees, their goals and how they try toachieve them, and the impact of thoseneeds and goals on job performance.

Chapter 10

What are the primary characteristics of diversity?o Sexual orientationo Ageo Gendero Raceo Ethnicityo Abilities

What are the differences between job description and jobspecification?

Job description: a formal, written explanation of a specific job,usually including job title, tasks, and relationship with other jobs,physical and mental skills required duties, responsibilities, andworking conditions.Job specification: a description of the qualifications necessary for aspecific job, in terms of education, experience, and personal andphysical characteristics.


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Chapter 11

Explain the marketing concept and its implications for developingmarketing strategies.

Marketing concept is the idea than an organization should try tosatisfy customers needs through coordinated activities that also

allow it to achieve its own goals.The marketing concept suggests that a business should find outwhat consumers need and want, develop the product that fulfillsthose needs or wants, and then get the products to the customer.Although customer satisfaction is the goal of the marketingconcept, a company must also achieve its own objectives, such asboosting productivity, reducing costs, or achieving a percentage ofa specific market.

Relationship marketing is the process of building intimate customerinteractions to maximize customer satisfaction. The goal ofrelationship marketing is to satisfy customers so well that theybecome loyal, committed to sharing information, and rely on thebusiness.

Briefly describe the evolution of the marketing concept from theIndustrial Revolution to the 21st century.

o Production Orientation 19th CenturyManufacturing efficiency: New technologies with new

management ideas and ways of using labor made productspoured into the marketplace, where demand formanufactured goods was strong.

o Sales Orientation Early 20th CenturySupply exceeds demand; a need to sell products exists.Sales were the primary means of increasing profits and themost important activities were personal selling andadvertising.

o Market Orientation 1950sAn approach requiring organizations to gather information

about customer needs, share information across the firm anduse information to build long-term relationships withcustomers

First determine what customers want New technologies are helping to improve

communication and are helping companies learn whatcustomers want


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Chapter 12

What is the product development process?To introduce a new product, a business generally follows a multistep

process:o Idea generation: New ideas can come from

marketing research engineers, and outsidesources such as advertising agencies,management consultants, or customers.

o Product screening: Marketers look at theorganization's resources and objectives; assesstheir ability to produce and market the product;and consider consumer desires, competition,technological changes, social trends, and

political, economic, and environmentalconsiderations.o Concept testingo Business analysis is a basic assessment of a

product's compatibility in the marketplace andits potential profitability.

o Product development: The idea is developedinto a prototype, and various elements of themarketing mix are developed for testing.

o Testing marketing is a trial mini launch of aproduct in limited areas that represent the

potential market, allowing a complete test of themarketing strategy in a natural

o Commercialization is the full introduction of acomplete marketing strategy and the launch ofthe product for commercial success.

What are a push strategy and a pull strategy?Push strategy: An attempt to motivate intermediaries to push theproduct down to their customers.

Pull strategy: the use of promotion to create consumer demand fora product so that consumers exert pressure on marketing channelmembers to make it available.


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Chapter 13

What are the 4 legal and social issues in Internet marketing?o Privacy: Shopping on the Internet allows companies

to better track consumers (cookies). Laws and regulationscannot keep up with the rapidly-changing Internet.

o Identity theft occurs when criminals obtain personalinformation that allows them to impersonate someone else inorder to access financial accounts and make purchases.

o Online fraud includes any attempt to conduct fraudulentactivities online. Cybercriminals are increasingly using onlinesocial networking sites and other digital media to commitfraud (charities and collect donations).

o Intellectual property can include songs, movies, books,electronics, software, etc. It is generally protected by patentsand copyrights.

What element of the marketing mix is best adaptable for digitalmedia?

Promotion is one of the best applications for digital media.Thanks to online promotion, consumers can be informed by readingcustomer-generated content before making purchasing decisions.Consumer consumption patterns are changing and marketers mustreact and give consumers what they want.

Chapter 14

Whats the accounting equation?Assets = Liabilities + Owners Equity

A firm's economicresources or items of valuethat it owns such as cash,

inventory, land,equipment, buildings, andother tangible andintangible things.

=A firms debts

and obligations +

The differencebetween a firms

assets and itsliabilities andreflects historicalvalues

The relationship between assets, liabilities and owners equity


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What are the differences between certified public accountant (CPA)and certified management accountants (CMA)?

Certified public accountant (CPA): An individual who has beenstate certified to provide accounting services to the public

(individuals or firms) for a fee ranging from the preparation offinancial records and the filling of tax returns to complex audits ofcorporate financial records.Certified management accountants (CMAs) can be CPAs and maybecome private accountants, CMAs, by passing a rigorousexamination by the Institute of Management Accountants, so CPAshave some managerial responsibility.

Chapter 15

What are the tools for regulating the money supply?

What is a mutual fund?Mutual fund is an investment company that pools individual investordollars and invests them in large numbers of well diversifiedsecurities. A special type of mutual fund called a money marketfund invests specifically in short-term debt securities issued bygovernments and large corporations.


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Chapter 16

What is the chief goal of financial managers?The chief goal of financial managers who focus on current assets

and liabilities is to maximize the return to the business on:o Cash: A crucial element in financial management is

effectively managing the firm's cash flow, the movement ofmoney through the organization on a daily, weekly, monthly,or yearly basis.

o Temporary investments of idle cash: If cash comes in fasterthan it is needed to pay bills, businesses can invest the cashsurplus for periods as short as one day or for as long as oneyear, until it is needed.

o Accounts receivable: Many businesses make the vast majorityof their sales on credit.

o Inventory: The financial manager has to coordinate inventorypurchases to manage cash flows. The object is to minimizethe firm's investment in inventory.

What are the types of bonds?o Unsecure bonds: debentures, or bonds that are not backed

by specific collateral and there are the most common type.

o Secured bonds: bonds that are backed by specific collateralthat must be forfeited in the event that the issuing firm

defaults.o Serial bonds: a sequence of small bond issues of progressively

longer maturity.

o Floating-rate bonds: bonds with interest rates that changewith current interest rates otherwise available in theeconomy.

o Junk bonds: a special type of high-interest-rate bond thatcarries higher inherent risks.

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Final Exam Study Guide Business