Fundamentals of Business Chapter Exam Questions
Course Introduction
Fundamentals of Business introduces students to the essential concepts and practices that underpin modern organizations and commercial enterprises. This course explores the foundational areas of business, including management, marketing, accounting, finance, entrepreneurship, operations, and business ethics. Through case studies, real-world examples, and interactive discussions, students gain a broad understanding of how businesses are structured, how they function in both domestic and global environments, and the critical thinking skills required to solve common business challenges. The course lays the groundwork for further study in business and prepares students to navigate the dynamic world of commerce effectively.
Recommended Textbook
Understanding Business 12th Edition by William G Nickels
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Chapter 1: Taking Risks and Making Profits Within the Dynamic Business Environment
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Sample Questions
Q1) 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
Q2) High tax rates tend to:
A) promote economic development.
B) make a nation's currency tradable.
C) discourage entrepreneurship.
D) reduce the amount of money created by the government.
Answer: C
Q3) Countries with an inadequately trained workforce and few entrepreneurs often achieve the highest levels of income by relying on a large number of workers.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Understanding Economics and How It Affects Business
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Q1) Over the past decade, socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies.
A)True
B)False
Answer: False
Q2) If the quantity supplied in a market exceeds the quantity demanded, a shortage will exist.
A)True
B)False
Answer: False
Q3) The market price of corn is falling. In a free-market economy, the most likely explanation of this price change is that:
A) the government has decided to set a higher price so that firms competing in the market make an adequate profit.
B) there is a surplus in the market for apples.
C) the supply of money has decreased.
D) the equilibrium price is lower than the market price.
Answer: B
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Chapter 3: Doing Business in Global Markets
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Sample Questions
Q1) When entering a foreign market, Mountain Stream Brewery entered into an agreement with a local firm to brew and market Mountain Stream's beer. This is an example of
A) licensing.
B) franchising.
C) foreign direct investment.
D) foreign subsidiaries.
Answer: A
Q2) ________ is the use of government regulations to limit the import of goods and services.
A) Trade protectionism
B) Fiscal policy
C) Countertrade policy
D) Monetary policy
Answer: A
Q3) According to current U.S. laws, American firms are prohibited from participating in joint ventures with foreign firms.
A)True
B)False
Answer: False
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Chapter 4: Demanding Ethical and Socially Responsible Behavior
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Q1) Recently, Bob was trying to choose among three mutual fund investments for his retirement account. As a socially conscious investor, he will prefer to invest in funds that hold the stocks of oil and coal companies, as opposed to wind-turbine and renewable energy companies.
A)True
B)False
Q2) Which of the following is an unresolved ethical issue that surrounds global trade?
A) Product quality
B) Labor standards
C) Transportation issues
D) Time to market issues
Q3) Corporate values, like personal values, are learned by observing what others do.
A)True
B)False
Q4) Making businesspeople more accountable for company actions may help restore trust in the free-market system and leaders in general.
A)True
B)False
Page 6
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Chapter 5: How to Form a Business
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Q1) Rhonda is convinced she has the best idea for a new business. Unfortunately, her business would require a fairly high initial investment and Rhonda has poor credit and very little personal wealth. She would be unlikely to find success if she organized her business as a sole proprietorship.
A)True
B)False
Q2) When a sole proprietor dies
A) the sole proprietor's heirs have the option of taking over the business.
B) the business is sold to a larger corporation.
C) the company continues to function as it always has.
D) the company always closes down.
Q3) James and Reilly were arguing over who was the senior partner and who was the junior partner, even though they started the business at the same time. If you were brought on board as their business advisor, you would explain to them that all partnerships have at least one general partner (known as the senior partner) and one limited partner (known as the junior partner).
A)True
B)False
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Chapter 6: Entrepreneurship and Starting a Small Business
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Sample Questions
Q1) The two primary concerns of an entrepreneur starting a new business are planning and record keeping.
A)True
B)False
Q2) Employees of small businesses often have greater job satisfaction than do employees of larger firms. One reason for this difference in job satisfaction is that employees of small businesses often
A) earn higher wages.
B) receive more vacation time.
C) get more respect from their bosses.
D) have more job security and better fringe benefits.
Q3) A good business plan describes the nature of the proposed business, the target market, the competitive advantages, and the qualifications of the owners.
A)True
B)False
Q4) Recent evidence suggests that the small business failure rate is significantly higher than previously reported.
A)True
B)False
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Chapter 7: Management and Leadership
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Sample Questions
Q1) Will is a manager for a major manufacturing corporation. He strives to maintain a free-rein approach to leadership in most situations. However, the company recently lost a major contract that it needs to continue the current level of operation. Management needs to take quick action to adjust, including slashing expenses. Under these conditions, Will should maintain his free-rein style of leadership.
A)True
B)False
Q2) Phillip is a manager for Connect Cable. Most of his day is spent scheduling the specific service calls that each employee performs, verifying job completion, and evaluating employee performance on each call. These responsibilities suggest that Phillip is a middle manager.
A)True
B)False
Q3) The traits used by autocratic leaders include warmth, friendliness, and understanding.
A)True
B)False
Q4) Identify and define the four key functions of management.
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Page 9
Chapter 8: Structuring Organizations for Todays
Challenges
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Sample Questions
Q1) The ________ an organization's structure, the ________ the span of control.
A) flatter; wider
B) flatter; narrower
C) taller; wider
D) taller; flatter
Q2) Competitive benchmarking rates an organization's products and operations against the industry average.
A)True
B)False
Q3) Companies benefit today from interfirm cooperation. One of the ways they cooperate is through networking. Another way is by seeking technological knowledge and new processes from exemplary firms sometimes outside their own industries. This is called
A) competency capturing.
B) technology swapping.
C) benchmarking.
D) broadening the knowledge base.
Q4) What is a matrix organization? What advantages and disadvantages are associated with this type of organization?
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) Outdoor Adventure Industries is a U.S.-based manufacturer of sporting goods. It has recently decided to make a major push to sell its products in the EU. In order to succeed in this new market Outdoor Adventure will need to
A) become certified in ISO 9001 standards.
B) convert its financial assets into euros.
C) avoid reliance on the Deming cycle.
D) reduce the wages of its production workers.
Q2) In recent years, the service sector of the U.S. economy has A) grown much more rapidly than the manufacturing sector. B) become the low-wage sector of the U.S. economy.
C) achieved extremely high productivity gains according to government reports. D) focused less on quality and more on reducing costs of production.
Q3) Statistical quality control (SQC) is the process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning of the production process.
A)True
B)False
Q4) How are MRP and ERP similar? How do they differ?
Q5) What are the ISO 9001 and ISO 14001 standards? Why are they important?
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Chapter 10: Motivating Employees
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Sample Questions
Q1) Open communication strategies include the removal of physical barriers such as separate offices.
A)True
B)False
Q2) Ronald, the CEO of Extel Micro-a technology provider with 17,000 employees-answers his own phone and takes calls from employees of all levels. He actually loves to hear about what employees think the company is doing right and what they could be doing better. Ronald is building teamwork by
A) creating an organizational culture that rewards listening.
B) rewarding employees with cash bonuses for good ideas.
C) giving high performers separate perks they value.
D) bolstering employee fairness.
Q3) Herzberg's research identified several ________ factors that did not necessarily motivate employees if they were increased, but could cause employees to become dissatisfied if they were missing or inadequate.
A) retroactive
B) inferior
C) hygiene
D) negative
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Page 12
Chapter 11: Human Resource Management: Finding and
Keeping the Best Employees
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Sample Questions
Q1) Brad recently earned a real estate license in Missouri and has interviewed with several groups to find a job. All have told him that his income will be based on a percentage of his real estate sales for the month. Brad will be paid
A) a monthly salary.
B) a piece rate.
C) on a commission basis.
D) through a profit-sharing plan.
Q2) Human resource planning involves the assessment of both the future demand and the future supply of the various types of labor needed by the organization.
A)True
B)False
Q3) In a compressed workweek, employees work more hours each day, but work fewer days each week.
A)True
B)False
Q4) Small businesses usually find recruitment easier than large firms.
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) Melvin has been a member of the American Arbitration Association and long-standing faculty member of the business school of a university for over a decade. Right now, he is on a plane headed for Detroit, where he will serve as an arbitrator between members of the United Auto Workers union and management of a major auto manufacturer. His responsibilities will deal with
A) certifying union representation at the Michigan manufacturing sites.
B) certifying union representation and collective bargaining at all manufacturing sites that the auto manufacturer currently has in operations, including any in Mexico and Canada (in accordance with NAFTA).
C) listening to both sides of an unresolved dispute between labor and management and render a binding decision on the problem.
D) protecting the interests of management and staving off a strike by the auto workers.
Q2) According to the Adapting to Change box, recent research on executive compensation has found that CEOs' pay should be performance-based and not a fixed salary system.
A)True
B)False
Q3) Identify and discuss three controversial employee-management issues.
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Chapter 13: Marketing: Helping Buyers Buy
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Sample Questions
Q1) People with unsatisfied wants and needs who have both the ability and the willingness to buy are
A) a market.
B) stockholders.
C) a profit center.
D) a marketing mix.
Q2) Intermediaries are firms in the middle of a series of organizations that distribute goods from producers to consumers.
A)True
B)False
Q3) The tremendous demand for consumer goods and services after World War II helped launch the production era of marketing.
A)True
B)False
Q4) Marketers are concerned with selling goods and services, and therefore are not involved in designing the products their firm will sell.
A)True
B)False
Q5) Describe the steps involved in conducting marketing research.
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Chapter 14: Developing and Pricing Goods and Services
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Sample Questions
Q1) Brody asks you to calculate the break-even point for his firm. You respond that you will need the following information
A) the values for all assets and liabilities.
B) total fixed costs, selling price per unit, and variable costs per unit.
C) forecasted sales volume, operating expenses, and asset values.
D) sales revenue and total liabilities.
Q2) The Pillsbury Doughboy is an example of a A) patent.
B) trademark.
C) private brand.
D) generic label.
Q3) A traditional McDonald's and a McCafe are examples of the McDonald's Corporation product mix.
A)True
B)False
Q4) Ultimately, the price of a good is determined by the interaction of supply and demand in the marketplace.
A)True
B)False
Q5) Discuss the role of packaging in a firm's total product offer.
Page 16
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Chapter 15: Distributing Products
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Sample Questions
Q1) Seasonal goods are kept in storage warehouses.
A)True
B)False
Q2) Some economists would say that intermediaries add costs to the channel of distribution and need to be eliminated.
A)True
B)False
Q3) Water transportation has benefits and drawbacks; for example, it is inexpensive but slow.
A)True
B)False
Q4) Devar was driving on Interstate 95 in eastern Florida when he noticed he was running low on gas. Devar was relieved when he found a gas station open at the next exit just 2 miles ahead. This is an example of the value place utility provides to a consumer.
A)True
B)False
Q5) Water transportation is the least expensive way to send goods overseas. A)True
B)False
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Chapter 16: Using Effective Promotions
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Sample Questions
Q1) Compared to advertising, publicity offers a firm greater control over when and how often the message is communicated.
A)True
B)False
Q2) After her sales presentation, Cheryl asks her customers what color they prefer and if they would like to pay by credit card. She hopes that these questions will help the sales process move beyond the customer's questions and objections. With limited time, Cheryl is utilizing a trial close to help finalize the sale more quickly.
A)True
B)False
Q3) Integrated marketing communication simplifies the marketing process by replacing personal selling with extensive use of advertising to create a positive brand image.
A)True
B)False
Q4) Mobile technology allows marketers to promote products to consumers through smartphones using text alerts.
A)True
B)False
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Page 18
Chapter 17: Understanding Accounting and Financial Information
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Sample Questions
Q1) A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.
A)True
B)False
Q2) The LIFO method of inventory valuation assumes the newest items in inventory are sold first.
A)True
B)False
Q3) The balance sheet is set up to reflect the Fundamental Accounting Equation. This equation shows
A) Assets = Liabilities + Owners' equity.
B) Revenues - Expenses = Gross profit.
C) Cash inflows = Cash outflows.
D) Current assets + Current liabilities = Owners' equity.
Q4) For firms that sometimes have difficulty selling their inventory, the current ratio is likely to be a better measure of liquidity than the acid-test ratio.
A)True
B)False
Q5) Thoroughly describe each of six parts of the accounting cycle.
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Chapter 18: Financial Management
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Questions
Q1) Akiko realizes the importance of developing a ________ for her interior design business. Akiko understands the importance of appropriately allocating resources in order to achieve the goals of her firm.
A) market prediction
B) financial forecast
C) budget
D) cash flow analysis
Q2) The most widely used source of short-term funding is trade credit.
A)True
B)False
Q3) Acquiring funds through equity financing requires the firm to pay annual dividends.
A)True
B)False
Q4) Unlike bonds, stocks offer the advantage of tax-deductible interest payments.
A)True
B)False
Q5) A firm's short-term forecast helps top management in preparing a company budget.
A)True
B)False
Page 20
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Chapter 19: Using Securities Markets for Financing and Investing Opportunities
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Q1) As a new father, Dan plans to accumulate funds over the next 18 years to help pay for his son's college education. Security markets provide Dan with A) financing opportunities.
B) investing opportunities.
C) opportunities to reduce his taxes.
D) borrowing opportunities.
Q2) The interest rate paid to bondholders is sometimes called the coupon rate.
A)True
B)False
Q3) Investment bankers provide ________ services by purchasing the entire new security issue from a corporation seeking to raise capital, and selling it to interested investors.
A) underwriting
B) investing
C) leveraging
D) discounting
Q4) Describe four different types of common stock that an investor may consider, depending upon the investor's strategy and risk tolerance.
Q5) Explain the differences between preferred stock and common stock.
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Chapter 20: Money, Financial Institutions, and the Federal Reserve
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Q1) All federally chartered banks are members of the Federal Reserve.
A)True
B)False
Q2) Thomas Jefferson proposed the establishment of the first central bank in the United States.
A)True
B)False
Q3) When the value of the U.S. dollar increases relative to other currencies,
A) the rate of inflation increases.
B) the size of the national debt decreases.
C) foreign goods become less expensive to U.S. consumers.
D) U.S. goods become less expensive to foreign buyers.
Q4) ________ represents the most commonly used category of the money supply.
A) M-1
B) M-2
C) M-3
D) L
Q5) Most countries restrict the flow of money in and out of their borders.
A)True
B)False
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Chapter 21: Appendix: Working Within the Legal Environment
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Q1) The Sarbanes-Oxley Act requires CEOs to verify the accuracy of their firms' financial statements to the SEC.
A)True
B)False
Q2) Most bankruptcies today are involuntary because creditors want to retrieve as much of their money as possible.
A)True
B)False
Q3) Decisions made by judges in previous cases are an important part of common law.
A)True
B)False
Q4) Administrative agencies are given the power by Congress to pass rules and regulations within a specific area of authority.
A)True
B)False
Q5) Chapter 13 bankruptcy permits individuals and small-business owners to repay creditors over a period of three to five years.
A)True
B)False
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Chapter 22: Appendix: Using Technology to Manage Information
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Q1) ________ looks for hidden patterns and unknown relationships among the data a firm has accumulated.
A) Tracking software
B) Econometric analysis
C) Data mining
D) Data parsing
Q2) Some advantages of cloud computing include flexible capacity and easier access.
A)True
B)False
Q3) During the 1980s business technology began to emphasize the use of technology to change how business was conducted by introducing new methods.
A)True
B)False
Q4) The main purpose of an intranet is to allow a company to keep in close contact with its customers.
A)True
B)False
Q5) What are the four characteristics of useful information?
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Chapter 23: Appendix: Managing Risk
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Sample Questions
Q1) The chance of a fire is an example of a pure risk.
A)True
B)False
Q2) There are two different kinds of risk: passive and active.
A)True
B)False
Q3) The management of risk is a small part of global business.
A)True
B)False
Q4) Tom and Sarah are both 24 years old and looking for car insurance. While comparing numbers, they notice the car insurance premiums charged for young male drivers are higher than the premiums for young female drivers. This is due to the rule of indemnity.
A)True
B)False
Q5) The type of risk that is of most concern to businesspeople is speculative risk.
A)True
B)False
Q6) Explain the four ways of managing risk.
Q7) Explain what makes the acceptance of risk possible for insurance companies.
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Chapter 24: Appendix: Managing Personal Finances
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Q1) Withdrawals from a traditional IRA prior to the age of 59½ are
A) tax deferred until you reach 65 years of age.
B) tax-free.
C) normally subject to a penalty and taxes on the income that is withdrawn from the IRA.
D) subject to a possible denial after review by the Internal Revenue Service.
Q2) Once they've accumulated enough money, buying a low-priced home is often a good investment for young adults.
A)True
B)False
Q3) The U.S. government provides several types of financial incentives to encourage people to attend college.
A)True
B)False
Q4) During a recent drop in the stock market, Damon took the opportunity to buy a wide variety of stocks even though many of his friends and relatives were selling. His investment strategy appears to be consistent with contrarian views.
A)True
B)False
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