Business Fundamentals
Exam Practice Tests
Course Introduction
Business Fundamentals provides students with an essential overview of key business concepts, practices, and structures. The course covers topics such as organizational types, the role of management, marketing principles, basic accounting and finance, operations, and the legal and ethical environment of business. Students will gain a foundational understanding of how businesses operate and interact within the broader economy, as well as develop practical skills in problem-solving, decision-making, and communication that are relevant in a wide range of professional settings.
Recommended Textbook Business in Action 7th Edition by Courtland L. Bovee
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Page 2
Chapter 1: Developing a Business Mindset
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Sample Questions
Q1) A firm uses strategic sourcing techniques to reduce its costs.This is an example of barrier to entry.
A)True
B)False
Answer: False
Q2) Which of the following statements is TRUE regarding business services?
A) Business services refer to those functions of business that are performed by external firms.
B) Business services refer to the in-house department of a company that is responsible for providing customer support.
C) Business services create the goods and services that a company can manufacture or perform for its customers.
D) Business services are found more in labor-intensive firms, as compared to capital-intensive firms.
E) Business services exist to help companies with specific needs in law, banking, real estate, and other areas.
Answer: E
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Chapter 2: Understanding Basic Economics
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Sample Questions
Q1) When demand for goods and services drops,businesses reduce production,thereby requiring fewer workers.The unemployment resulting because of this phenomenon is known as ________ unemployment.
A) intrinsic
B) cyclical
C) structural
D) seasonal
E) frictional
Answer: B
Q2) Frictional unemployment is caused by economic fluctuations.
A)True
B)False
Answer: False
Q3) Which of the following is a characteristic feature of economic contraction?
A) decreased unemployment rates
B) decreased consumer spending
C) increased income
D) increased employment
E) increased demand
Answer: B
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Chapter 3: The Global Marketplace
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Sample Questions
Q1) Providing short-term loans to countries that are unable to meet their financial obligations is a primary function of the International Monetary Fund.
A)True
B)False
Answer: True
Q2) Which of the following is a major disadvantage of customizing products to suit local markets?
A) Customization is likely to increase the costs and operational complexity.
B) Customized products attract more taxes and duties.
C) It reduces the diversity of a company's offerings.
D) Customization prevents companies from obtaining subsidies.
E) Customers' preferences will likely be ignored when using customization.
Answer: A
Q3) The World Trade Organization is a permanent forum for negotiating,implementing,and monitoring international trade procedures.
A)True
B)False
Answer: True
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5
Chapter 4: Business Ethics and Corporate Social Responsibility
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Sample Questions
Q1) Since its inception,Whole Foods Market has contributed 5% of its profits to charitable endeavors.At Whole Foods Market,company leaders believe they have responsibilities beyond making a profit.The firm has a ________ approach to CSR.
A) cynical
B) minimalistic
C) primary
D) philanthropic
E) proactive
Q2) ________ is the study of the relationship between organisms and the natural environment.
A) Environmentalism
B) Ecology
C) Energy conservation
D) Ergonomics
E) Sustainability
Q3) Making a morally wrong decision is not the same thing as an ethical lapse.
A)True
B)False
Q4) What is a conflict of interest? How is it related to ethical decision making?
Page 6
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Chapter 5: Forms of Ownership
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Sample Questions
Q1) A disadvantage of the corporate structure is that it ________.
A) limits the business's ability to raise capital
B) limits the liquidity that businesses have
C) increases the risk of conducting business
D) involves strict reporting requirements
E) imposes unlimited liability on the owners
Q2) Corporate officers of an organization are elected directly by the shareholders of a corporation.
A)True
B)False
Q3) Explain the role of corporate officers in corporate governance.
Q4) Joint ventures ________.
A) let companies create tightly integrated operations
B) are less risky than strategic alliances
C) are riskier to a firm than formal mergers
D) disrupt the original companies and their business
E) would not help companies gain credibility in new fields
Q5) Compare and contrast a limited liability company and a benefit corporation.
Q6) Compare and contrast a general partnership and a limited partnership.
Q7) Compare and contrast sole proprietorships and general partnerships.
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Chapter 6: Entrepreneurship and Small Business Ownership
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Q1) Three factors contributing to the increased number of small businesses are technologies such as e-commerce,growing diversity in entrepreneurship,and
A) downsizing and outsourcing
B) increased ease in going public
C) nationalization
D) market regulation
E) monopolistic business practices
Q2) Compare and contrast business partners with mentors and advisory boards as sources of advice and support for entrepreneurs?
Q3) A ________ gives a franchisee the right to produce and distribute the manufacturer's products,using supplies purchased from the franchisor.
A) product franchise
B) business-format franchise
C) manufacturing franchise
D) licensed franchise
E) utilitarian franchise
Q4) What is a business plan? How is it different from an executive summary?
Q5) How do downsizing and outsourcing influence the number of small businesses?
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Chapter 7: Management Roles, Functions, and Skills
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Sample Questions
Q1) Systems thinking ability refers to the ability to understand the relationship between components and the larger output.Systems thinking ability is an example of a(n)________ skill.
A) interpersonal
B) conceptual
C) technical
D) administrative
E) decision-making
Q2) Compare and contrast the roles of top managers and middle managers.
Q3) Leading is the process of influencing and motivating people to work willingly and effectively toward common goals.
A)True
B)False
Q4) Providing leadership to employees is an example of a(n)________ role of management.
A) interpersonal
B) communicative
C) instructional
D) decisional
E) informational
Page 9
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Chapter 8: Organization and Teamwork
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Sample Questions
Q1) In a team,people who focus on work-related accomplishments over human needs,and help the team reach its goals are said to assume the ________.
A) task-specialist role
B) nonparticipator role
C) dual role
D) socioemotional role
E) people-oriented role
Q2) Ace,Inc.,an American multinational computer software company,has a large number of hierarchical levels.Each manager is responsible for a few employees and maintains a tight control on them.At Ace Inc.,the time taken to make decisions is very high,as each decision needs to go through numerous management layers.Which of the following statements is TRUE about the organizational structure of Ace Inc.?
A) Ace Inc. has a narrow span of management.
B) Ace Inc. is a flat organization.
C) Ace Inc. lacks work specialization.
D) Ace Inc. is a decentralized organization.
E) Ace Inc. encourages employees to form self-managed teams.
Q3) What is a virtual team?
Q4) Define the five major types of organization structure.
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Chapter 9: Production Systems
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Sample Questions
Q1) In systems view,an organizational department is viewed as a(n)________.
A) serial milestone of a process
B) system without outputs
C) independent entity
D) interconnected element
E) system without inputs
Q2) Gobex financial services is a multinational firm that has many branches across the globe.The U.S.subsidiary of the firm assigns its accounting tasks to the Chinese subsidiary.Lower labor costs enable the Chinese firm to perform the tasks more efficiently.This is an example of ________.
A) offshoring
B) outsourcing
C) leveraging
D) customization
E) external valuation
Q3) Compare and contrast materials requirement planning (MRP)and enterprise resource planning (ERP).
Q4) Compare and contrast the production of goods and services.
Q5) Explain how systems are found in a company.
Q6) Describe lean systems and just-in-time (JIT)inventory systems.
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Chapter 10: Employee Motivation
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Sample Questions
Q1) Unlike with the other classical theories,there is a lot of research to validate Herzberg's two-factor theory.
A)True
B)False
Q2) Donald is the customer service manager at Artemis Technologies,a software development firm.During a lean period,employees who handle customer issues over the telephone are trained and asked to handle walk-in customers for 2 months; similarly,employees who handle walk-in customers are trained and asked to handle customer issues over the telephone for 2 months.Donald makes these changes to improve employee motivation.In this example,Donald is most likely to be using which of the following strategies?
A) centralization
B) cross-training
C) decentralization
D) horizontal integration
E) benchmarking
Q3) Discuss the four indicators that can be used to measure motivation in a workplace setting?
Q4) List the managerial strategies that are vital to maintaining a motivated workforce.
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Chapter 11: Human Resources Management
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Sample Questions
Q1) Massay Manufacturers,a toy manufacturing company,provides free consultation with a professional dietitian who comes to the office premises every Friday.The HR department also encourages employees with low immunity to avail the gym facilities provided by the firm.Massay Manufacturers uses which of the following tools to tackle the high health-care costs?
A) sliding-scale plans
B) health insurance buying groups
C) wellness programs
D) health savings accounts
E) high-deductible insurance
Q2) An overall environment that results from job and work conditions is called
A) ergonomics
B) work-life balance
C) quality of work life
D) job enrichment
E) employee turnover
Q3) Roughly,10 percent of U.S.workers can be categorized as contingent employees.
A)True
B)False
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Chapter 12: Labor Relations
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Sample Questions
Q1) A national union is composed of many local unions that represent employees in specific locations.
A)True
B)False
Q2) "Unions have a negative impact on productivity." Do you agree with this statement? Explain your answer.
Q3) Form two student groups of five members each.Conduct a mock trial of a collective bargaining process using the groups with one group representing the management of an industry and another group representing the labor union.
Q4) Which of the following is a valid observation of arbitrators?
A) Arbitrators usually represent the management rather than the union.
B) Collective bargaining contracts must specify a permanent arbitrator.
C) Most arbitrators are chosen on a case-by-case basis.
D) Most decisions by arbitrators are not legally binding.
E) Arbitrators usually represent the union rather than the management.
Q5) Labor unions are organizations that represent employees in negotiations with management.
A)True
B)False
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Chapter 13: The Art and Science of Marketing
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Sample Questions
Q1) A central element in the marketing concept is involving the customer as a partner in a mutually beneficial relationship rather than treating the customer as a passive recipient of products and promotional messages.
A)True
B)False
Q2) Ethnographic research refers to research that measures brain activity while customers are viewing or interacting with product,Web site,or other elements.
A)True
B)False
Q3) What is market segmentation.List the four fundamental factors marketers use to identify market segments.
Q4) Studying people in their daily lives to learn about their needs,wants,and behaviors in real-life settings is called ________.
A) neuromarketing studies
B) ethnographic research
C) experiments
D) focus groups
E) process data collection
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Chapter 14: Product and Pricing Strategies
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Sample Questions
Q1) ________ are expensive organizational products with a long useful life.
A) Shopping products
B) Capital items
C) Expense items
D) Specialty products
E) Convenience products
Q2) Five college graduates decide to open a laundry service company.They import six commercial washing machines from Italy to set up a factory.In this case,the commercial washing machines are best referred to as a(n)________.
A) capital item
B) shopping product
C) expense item
D) convenience product
E) specialty product
Q3) Skim pricing is used during the ________ stage of a product.
A) introductory
B) maturity
C) decline
D) growth
E) saturation
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Chapter 15: Distribution and Marketing Logistics
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Sample
Questions
Q1) Sam's Club sells sports apparel to individual consumers for their personal use and to small businesses that resell those goods to consumers.Therefore,Sam's Club functions as both a retailer and a wholesaler.
A)True
B)False
Q2) Disagreement over rights and responsibilities of the organizations in a distribution channel is termed as ________.
A) shopper marketing
B) category killer
C) channel conflict
D) disintermediation
E) positioning
Q3) Having your products available in as many outlets as possible is known as exclusive distribution.
A)True
B)False
Q4) Compare and contrast department stores with specialty stores.
Q5) What is a distribution mix? List the issues that need to be considered while choosing distribution channels.
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Chapter 16: Customer Communication
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Sample Questions
Q1) Institutional advertisements that present a company's point of view on public issues such as education or health care are known as ________ advertising.
A) product
B) comparative
C) cooperative
D) advocacy
E) consultative
Q2) The ad that tells you to "call within the next ten minutes because supplies are limited" is using advertising appeal based on ________.
A) logic
B) emotion
C) humor
D) scarcity
E) sentiment
Q3) Targeted display advertising allows customers or website visitors to opt-in to mailing lists.
A)True
B)False
Q4) Compare and contrast personal selling with consultative selling.
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Chapter 17: Financial Information and Accounting Concepts
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Sample Questions
Q1) Identify the legislation that prohibits investment bankers from influencing stock analysts and requires CEOs and CFOs to sign statements attesting to the accuracy of their financial statements.
A) Reconstruction Finance Corporation Act
B) Public Utility Company Act
C) Ethics in Government Act
D) Sarbanes-Oxley Act
E) Financial Services Modernization Act
Q2) Robex Woodworks is a furniture manufacturer.The company has purchased timber worth $5,000 from one of its suppliers and has not paid them yet.This amount is recorded as ________ in the balance sheet.
A) accrued expense
B) owners' equity
C) supplier's equity
D) accounts payable
E) deferred expense
Q3) Compare and contrast public accountants and private accountants.
Q4) Income statement is a record of a company's total assets and liabilities.
A)True
B)False
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Chapter 18: Financial Management
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Q1) Hedging refers to forming contracts that allow a company to ________.
A) obtain funds for a short period without paying interest
B) buy supplies in the future at designated prices
C) finance long-term debt on a continuous basis
D) engage in buyer-seller relationships with many firms
E) issue letters of credit to buyers exterior to the home country
Q2) Cost of capital is the average rate of interest a firm pays on its combination of debt and equity.
A)True
B)False
Q3) Venture capital is an example of private equity.
A)True
B)False
Q4) ________ is an agreement to use an asset in exchange for regular payment.
A) Credit card
B) Lease
C) Mortgage
D) Trade credit
E) Commercial paper
Q5) Compare and contrast secured bonds and debentures.
Page 20
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Chapter 19: Financial Markets and Investment Strategies
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Sample Questions
Q1) You invest $6,000 in a no-load mutual fund whose net asset value per share is $36.How many shares of the mutual fund will you receive if the coupon is 8 percent?
A) 4.92
B) 166.66
C) 750
D) 288
E) 20.83
Q2) Derivatives are contracts whose value is derived from some other entity.
A)True
B)False
Q3) What is load? What are no-load funds?
Q4) Riban Industries is a manufacturer of watches.The company's profits are predictable and the stock yields huge dividends,although the prospects for growth are low.Riban Industries is an example of a(n)________ stock.
A) blue chip
B) income
C) cyclical
D) penny
E) defensive
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Chapter 20: The Money Supply and Banking Systems
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Q1) ________ are non-bank companies that initiate loans on behalf of a mortgage lender in exchange for a fee.
A) Mortgage brokers
B) Credit unions
C) Thrifts
D) Loan associations
E) Independent mortgage companies
Q2) Equifax,Experian,and TransUnion are the major credit-rating agencies for businesses and securities.
A)True
B)False
Q3) Loan-to-value (LTV)is commonly defined as the amount of a loan relative to a house's assessed value.
A)True
B)False
Q4) If the Fed sells Treasuries in open-market operations,the country's money supply increases.
A)True
B)False
Q5) Compare and contrast thrift banks and credit unions.
Page 22
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