Business Fundamentals
Test Questions
Course Introduction
Business Fundamentals offers an essential overview of key concepts and practices within the field of business, introducing students to core topics such as management, marketing, accounting, finance, and entrepreneurship. Through real-world examples and foundational theory, this course equips learners with a solid understanding of how organizations operate, make decisions, and compete in dynamic markets. By developing critical thinking and problem-solving skills, students are prepared to analyze business scenarios, understand the roles and responsibilities of various stakeholders, and explore the ethical implications of business activities. This course serves as an ideal starting point for anyone seeking to gain a broad perspective on the business world or planning to pursue further studies in business-related disciplines.
Recommended Textbook
Understanding Business 12th Edition by William G Nickels
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Page 2
Chapter 1: Taking Risks and Making Profits Within the Dynamic Business Environment
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Sample Questions
Q1) Appliance repair firms, tax consultants, law firms, and insurance companies are all business firms that are part of the ______ sector.
A) production
B) management
C) neo-industrial
D) service
Answer: D
Q2) People over 65 years old represent
A) the unemployed generation.
B) the single-parent family generation.
C) a potentially lucrative market.
D) a group that has never contributed to Social Security.
Answer: C
Q3) Which of the following industries will most likely benefit from an aging population?
A) Financial services to help clients plan for their education
B) Home health care businesses
C) Children's day-care centers
D) Auto industry
Answer: B
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Chapter 2: Understanding Economics and How It Affects Business
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Q1) Colin lives in a nation whose government embraces capitalism. He owns his own home and car, as well as his own business and building. Colin maintains ownership due to
A) eminent domain.
B) the freedom of choice.
C) the right to own private property.
D) the freedom of competition.
Answer: C
Q2) A monopoly occurs when there is a single seller for a product or service.
A)True
B)False
Answer: True
Q3) The freedom for people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under
A) the right to own private property.
B) freedom of expression.
C) freedom of choice.
D) freedom of competition.
Answer: A
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Chapter 3: Doing Business in Global Markets
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Sample Questions
Q1) The Foreign Corrupt Practices Act of 1978 created an advantage for American businesspeople to compete in global markets.
A)True
B)False
Answer: False
Q2) The only deposits of a rare and sought-after mineral known as ursarite are found in Russia. Since no other nation has deposits of ursarite, Russia has a(n)________ in this mineral.
A) protected advantage
B) diversified benefit
C) absolute advantage
D) relative internal benefit
Answer: C
Q3) A joint venture is a partnership in which two or more companies join to undertake a major project. All parties commit financing and risk to the project.
A)True
B)False
Answer: True
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Chapter 4: Demanding Ethical and Socially Responsible Behavior
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Sample Questions
Q1) Compliance-based ethics codes typically
A) rely on laws and regulations outside the firm for guidance.
B) have a strong affinity for shared accountability among employees.
C) promote a "do-it-right" climate.
D) enable responsible employee conduct.
Q2) A growing number of people feel that an employee's ethics are a personal matter, and have nothing to do with management.
A)True
B)False
Q3) Legal behavior and ethical behavior are basically the same.
A)True
B)False
Q4) Determining what is involved for a firm to be socially responsible
A) is easy.
B) varies even among those who are interested in corporate responsibility.
C) helps government officials develop appropriate legislation.
D) varies from industry to industry due to different laws.
Q5) Promoting social justice is a responsibility of society, but not business.
A)True
B)False
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Chapter 5: How to Form a Business
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Sample Questions
Q1) What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?
Q2) The form of business ownership best suited to raising large amounts of money for expansion is the
A) sole proprietorship.
B) partnership.
C) corporation.
D) cooperative.
Q3) Which of the following statements about farm cooperatives is most accurate?
A) Farm cooperatives have declined in importance in recent years.
B) Farm cooperatives have become a major force in American agriculture.
C) Farm cooperatives have run afoul of U.S. antitrust laws in recent years.
D) Farm cooperatives have increased in number, but decreased in size in recent years.
Q4) A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of debt.
A)True
B)False
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Chapter 6: Entrepreneurship and Starting a Small Business
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Sample Questions
Q1) A creative person working within a corporation to launch new products and generate new profits is known as a(n)
A) arbitrator.
B) micropreneur.
C) macropreneur.
D) intrapreneur.
Q2) Due in part to government support, the majority of U.S. small businesses are involved in exporting.
A)True
B)False
Q3) The SBA's ________ program provides export-financing opportunities for small businesses.
A) Global Trade funding
B) Homeland Security funding
C) Export Express loan
D) International Monetary loan
Q4) The Small Business Administration's microloan program offers small businesses very small loans.
A)True
B)False
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Chapter 7: Management and Leadership
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Sample Questions
Q1) When managers determine that an organization is not making sufficient progress toward achieving its goals and objectives and they develop corrective measures, they are involved in
A) controlling.
B) planning.
C) directing.
D) accounting.
Q2) Conceptual skills refer to the ability of a manager to perform the tasks associated with a specific discipline or department.
A)True
B)False
Q3) Which of the following statements about leadership styles is most accurate?
A) A manager should choose one style and use it consistently.
B) Managers have no control over the leadership style they use.
C) Effective managers often use a variety of leadership styles.
D) Managers should always start with an autocratic style, but can gradually switch to a more democratic approach if workers earn their trust.
Q4) What is empowerment? How has the movement toward empowerment changed the role of the manager?
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Chapter 8: Structuring Organizations for Todays
Challenges
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Sample Questions
Q1) Digital natives, those who grew up with the Internet and other devices, are an important customer group that most businesses want to reach.
A)True
B)False
Q2) Employees who perform functions that advise and assist line personnel are known as
A) middle managers.
B) empowered workers.
C) secondary employees.
D) staff personnel.
Q3) ________ means that decision-making authority is delegated to lower-level managers and employees.
A) Uniformity of authority
B) Decentralized authority
C) Specification of authority
D) Standardized authority
Q4) Max Weber believed that promotion should be based solely on seniority.
A)True
B)False
Q5) Describe two major issues that are important in organizational design.
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Chapter 9: Production and Operations Management
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Sample Questions
Q1) Manufacturing companies are concerned with production management, while service companies are concerned with operations management.
A)True
B)False
Q2) Currently, manufacturing accounts for only around 70% of U.S. GDP.
A)True
B)False
Q3) One key to the resurgence of U.S. firms as world-class competitors has been the implementation of a focus on quality.
A)True
B)False
Q4) Ahmed, an operations manager for a smartphone manufacturer, just accepted a new operations position with a service company. Ahmed will find that operations management at the new job will differ significantly from operations management at the manufacturer.
A)True
B)False
Q5) How are MRP and ERP similar? How do they differ?
Q6) What are the ISO 9001 and ISO 14001 standards? Why are they important?
Page 11
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Chapter 10: Motivating Employees
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Sample Questions
Q1) According to Herzberg's views, which of the following strategies would be most likely to result in a higher level of worker motivation?
A) improving the physical working conditions
B) providing clear and fair work rules and policies
C) making the work itself more interesting and challenging
D) using time-motion studies to find the most efficient techniques for employees to use
Q2) Equity theory states that employees will perform well if they
A) understand the nature of their responsibilities.
B) have an opportunity to impress others in the organization.
C) believe the reward they receive fairly compensates them for their efforts when compared to others in similar positions.
D) know that their supervisor has set reasonable performance goals and communicated them clearly.
Q3) Frederick Taylor's goal was to find ways to improve worker motivation by making work more interesting and challenging.
A)True
B)False
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Chapter 11: Human Resource Management: Finding and
Keeping the Best Employees
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Sample Questions
Q1) Apples and Oranges Produce Company found it needs more workers during harvest times than at other times of the year. Hiring contingent workers could be an efficient way for Apples and Oranges to meet its temporary employment needs.
A)True
B)False
Q2) According to the Reaching Beyond Our Borders box, human resource managers will be able to count on the superiority of American business practices as they help manage a global workforce.
A)True
B)False
Q3) Most firms today are checking the backgrounds of job applicants more carefully than they did in the past.
A)True
B)False
Q4) The effectiveness of the EEOC has been limited because Congress never gave it any authority to enforce its mandates.
A)True
B)False
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Q5) Identify and describe three common methods of training and developing employees.
Chapter 12: Dealing With Employeemanagement Issues
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Q1) The American Federation of Labor (AFL) was initially intended to be a single craft union.
A)True
B)False
Q2) In 1997, the Supreme Court rendered a decision on a case stipulating that sexual harassment law
A) did not apply to casual jokes of a sexual nature.
B) applied to same-sex harassment, as well.
C) did not apply to married couples who are working together.
D) only applied to cases where a subordinate felt harassed by an immediate supervisor.
Q3) The National Labor Relations Act (Wagner Act) gave labor the legal justification to pursue collective bargaining and other key labor issues.
A)True
B)False
Q4) Tactics used by management when collective bargaining breaks down include injunctions and lockouts.
A)True
B)False
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Chapter 13: Marketing: Helping Buyers Buy
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Sample Questions
Q1) Secondary data consists of information that has already been compiled by others and is published in journals and books or made available online.
A)True
B)False
Q2) Pham, after years working with the consumer market, has just been transferred into a new job dealing with buyers in the B2B market. Which of the following correctly identifies a key difference Pham will likely notice between consumer markets and B2B markets?
A) Businesses focus on developing wants and needs in consumer markets, while firms work to satisfy the existing needs of the B2B market.
B) Relationship marketing tends to be much more important in consumer markets than in the business-to-business markets.
C) Buyers in the business-to-business markets tend to be more rational than buyers in consumer markets.
D) Business-to-business markets make greater use of marketing intermediaries such as wholesalers and retailers than do consumer markets.
Q3) Explain how mass marketing and relationship marketing differ.
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Chapter 14: Developing and Pricing Goods and Services
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Sample Questions
Q1) Charging high prices to earn large profits during a time when there is little competition represents a ________ strategy.
A) penetration
B) bundling
C) skimming
D) cost-based
Q2) A brand that has been given exclusive legal protection, such as the McDonald's golden arches, is a
A) private brand.
B) promotional mark.
C) dealer brand.
D) trademark.
Q3) Firms use brand managers or brand teams to give them greater control over both new-product development and product promotion.
A)True
B)False
Q4) A knockoff brand is a brand name that has lost its exclusive legal protection.
A)True
B)False
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Chapter 15: Distributing Products
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Sample Questions
Q1) Franchise systems, wholesaler-sponsored chains, and retail cooperatives are all forms of contractual distribution systems.
A)True B)False
Q2) According to the Spotlight on Small Business box, thredUP founders discovered their first distribution system, very similar to eBay's, was the best suited for their business.
A)True B)False
Q3) In the U.S. the largest percentage of goods (by volume) is shipped by truck.
A)True B)False
Q4) Explain why you agree or disagree with the following statement: "Marketing intermediaries must charge a high enough price for the functions they perform to earn a profit. Therefore, the cost of distributing goods can almost always be reduced by eliminating marketing intermediaries from the channel of distribution."
Q5) Seasonal goods are kept in storage warehouses.
A)True B)False
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Chapter 16: Using Effective Promotions
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Sample Questions
Q1) Fit Family utilizes newspaper and television ads designed to motivate potential buyers to seek out their product. This represents a push promotional strategy.
A)True
B)False
Q2) A ________ is an endorsement from a customer praising a firm's product.
A) testimonial
B) news release
C) viral message
D) virtual endorsement
Q3) After prospects have been identified and qualified, the next step in the selling process is ________. This step requires the salesperson to learn as much as possible about the potential customers' wants and needs.
A) customer specification
B) the preapproach
C) consumer trait analysis
D) customer quantification
Q4) Advertising covers the major production costs of television and radio programs.
A)True
B)False
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Chapter 17: Understanding Accounting and Financial Information
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Sample Questions
Q1) Purchasing insurance, paying employees, and using supplies are examples of financial transactions.
A)True
B)False
Q2) Gross profit represents profit after the deduction of cost of goods sold, and before the deduction of all other selling expenses, general expenses, and tax expense.
A)True
B)False
Q3) Rent, depreciation, and salaries are examples of A) current assets.
B) current liabilities.
C) owners' equity.
D) operating expenses.
Q4) Assets are listed on the balance sheet in order of liquidity, with the most liquid assets listed first.
A)True B)False
Q5) What is ratio analysis? Explain the four different types of ratios and how each is used.
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Chapter 18: Financial Management
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Q1) A tool that provides lots of convenience, credit cards are a source of a readily available line of credit for a small business because they provide convenience.
A)True
B)False
Q2) The first step in financial planning is to develop a budget to better control costs.
A)True
B)False
Q3) A debenture bond is backed only by the reputation of the issuer.
A)True
B)False
Q4) The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called
A) opportunity rate.
B) retained earning.
C) cost of capital.
D) acquisition cost.
Q5) Identify and describe the major steps involved in financial planning.
Q6) Identify and describe three types of short-term financing.
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Chapter 19: Using Securities Markets for Financing and Investing Opportunities
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Q1) A share of preferred stock for Marshall Manufacturing currently sells for $120. It offers the investor a dividend rate of 8%, on a par value of $100. If the investor owns 500 shares, her total annual dividend will equal
A) $800
B) $8.00
C) $2,000
D) $4,000
Q2) With everything else constant, investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund.
A)True
B)False
Q3) A bull market occurs when overall stock prices increase.
A)True
B)False
Q4) Bondholders represent creditors of a firm.
A)True
B)False
Q5) Explain the differences between preferred stock and common stock.
Q6) Discuss the role of investment bankers in the securities markets.
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Chapter 20: Money, Financial Institutions, and the Federal Reserve
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Sample Questions
Q1) The M-3 includes M-1 money, but not M-2 money.
A)True
B)False
Q2) Inflation occurs in an economy with too little money chasing too many goods.
A)True
B)False
Q3) The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.
A)True
B)False
Q4) The World Bank provides funding for
A) the developed nations in Europe and Asia.
B) firms that want to participate in international trade but lack foreign exchange.
C) multinational corporations that have a strong credit rating.
D) projects to improve the standard of living in less-developed nations.
Q5) Many employers offer direct deposit as a convenient and cost-saving method of distributing employee pay each month.
A)True
B)False
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Chapter 21: Appendix: Working Within the Legal Environment
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Sample Questions
Q1) Copyrights can be passed on to the creator's heirs.
A)True
B)False
Q2) Which of the following is a condition required for a legally binding contract?
A) discharge of obligation
B) warranty
C) mutual acceptance
D) duress
Q3) The Environmental Protection Agency is an example of a(n)
A) common law agency.
B) statutory judicial agency.
C) private placement agency.
D) administrative agency.
Q4) Who owns the copyright of a cartoon character created by an employee of a firm as part of their normal job responsibilities?
A) employee who created the cartoon character
B) employer of the cartoon character's creator
C) cartoon characters are not covered by copyright protection
D) union that represents the employee
Q5) Explain the difference between statutory law, common law, and business law.
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Chapter 22: Appendix: Using Technology to Manage Information
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Q1) Which of the following is the best assessment of the impact extranets have had on the way small businesses operate?
A) As yet, extranet technology has had little impact on small businesses, because the technology is too new and expensive.
B) The development of extranets has put small firms at a serious competitive disadvantage, because suppliers and customers are more willing to participate in extranets set up by larger organizations.
C) The use of extranets enables small firms to share and process data in ways that had been available in the past only to large firms that could afford electronic data interchange technology.
D) The extranet has made it easier for small firms to offer their goods and services to the general public because of the increased bandwidth this technology provides.
Q2) Transaction data gathered at the point of sale is known as
A) physical-world observations.
B) business process information.
C) public data.
D) personal preference data.
Q3) What are the four characteristics of useful information?
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Chapter 23: Appendix: Managing Risk
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Sample Questions
Q1) ________ insurance provides benefits to the survivors of workers who die as a result of work-related injuries.
A) Health
B) Professional liability
C) Workers' compensation
D) Malpractice
Q2) Health savings accounts are managed care plans that have a high deductible.
A)True
B)False
Q3) Most homeowners' insurance policies automatically provide adequate coverage for small home-based businesses.
A)True
B)False
Q4) Risk is a term that refers to the chance of loss, the degree of probability of loss, and the amount of possible loss.
A)True
B)False
Q5) Explain the benefits of workers' compensation. Who is required to carry this type of insurance?
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Chapter 24: Appendix: Managing Personal Finances
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Q1) Which of the following is a form of whole life insurance that provides a death benefit that varies with the performance of the investments of the insurance company?
A) flexible whole life insurance
B) variable life insurance
C) adjustable benefit insurance
D) multiyear level-premium insurance
Q2) Henry and Mila are newlyweds and received some very expensive wedding gifts, including some beautiful silverware and jewelry. Their homeowner's policy
A) automatically covers these items.
B) does not automatically cover such items and they must take out a separate policy specifically for those types of items.
C) does not automatically cover these items, but a rider can be used to add this coverage.
D) automatically covers these items from theft, but not from damage due to fire, explosion, or vandalism.
Q3) Term life insurance offers pure insurance with no savings feature.
A)True
B)False
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