Business Fundamentals and Society
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Questions and Answers

Which of the following factors are included in the PESTEL framework?

  • Technological (correct)
  • Economic (correct)
  • Personal
  • Financial

    • Which internal stakeholder is primarily responsible for overseeing company operations and guiding employees?

  • Customers
  • Creditors
  • Suppliers
  • Managers (correct)

    • What is a major disadvantage of a sole proprietorship?

  • It lacks flexibility in decision-making.
  • Profits are solely retained by the owner.
  • It is unable to obtain funding easily.
  • There is unlimited liability. (correct)

    • What does the 'E' in ESG reports stand for?

    <p>Environmental</p> Signup and view all the answers

    Which of the following best describes a corporation's primary advantage?

    <p>Limited liability</p> Signup and view all the answers

    What unique structural characteristic does Patagonia have?

    <p>It is owned by two non-profits.</p> Signup and view all the answers

    Which form of business structure is typically considered to have no double taxation?

    <p>Non-profit</p> Signup and view all the answers

    What is a downside of being a non-profit organization?

    <p>It requires volunteers to operate.</p> Signup and view all the answers

    What was the estimated financial loss for GM due to the strike?

    <p>$3 billion</p> Signup and view all the answers

    Which of the following is NOT considered a top business career today?

    <p>Financial analyst</p> Signup and view all the answers

    Which emerging career pathway focuses on environmental issues?

    <p>Sustainability consultant</p> Signup and view all the answers

    What significant financial impact did the VW business ethics scandal have on the company?

    <p>$34.8 billion</p> Signup and view all the answers

    Which of the following is one of the first steps in building a financial plan?

    <p>Assess current financial condition</p> Signup and view all the answers

    What is required to double your money in terms of interest rate?

    <p>Greater than 8%</p> Signup and view all the answers

    How are federal tax liabilities calculated?

    <p>Apply tax rate to taxable income</p> Signup and view all the answers

    In which of these tax brackets does an income of $200,000 fall?

    <p>$182,101 - $231,250</p> Signup and view all the answers

    Which of the following is true about pharmaceutical companies and public funding?

    <p>The government receives a share of the profits</p> Signup and view all the answers

    What type of roles are expected to expand due to advances in technology?

    <p>Data science and cybersecurity roles</p> Signup and view all the answers

    What distinguishes an income statement from a cash flow statement?

    <p>An income statement reflects revenue and expenses over time.</p> Signup and view all the answers

    Which of the following is NOT a key component of effective networking?

    <p>Focusing solely on quantity of contacts</p> Signup and view all the answers

    What is an example of risk transfer in risk management?

    <p>Acquiring insurance</p> Signup and view all the answers

    Which statement accurately describes a responsibility of Human Resource Management?

    <p>Ensuring legal compliance and mitigating risks</p> Signup and view all the answers

    What trend was observed in US union membership from 1960 to 1980?

    <p>It peaked and began a steady decline.</p> Signup and view all the answers

    Which branch of government is primarily responsible for enforcing laws?

    <p>Executive</p> Signup and view all the answers

    What main purpose does a balance sheet serve?

    <p>It shows a company’s financial position at a point in time.</p> Signup and view all the answers

    What was one of the resolutions to the GM strike in 2019 regarding healthcare costs?

    <p>Worker healthcare contributions were maintained at current levels.</p> Signup and view all the answers

    Which of the following is a characteristic of charisma in networking?

    <p>A special magnetic charm or appeal.</p> Signup and view all the answers

    Which factor contributed to the US national debt reaching an all-time high in 1945?

    <p>Increased military spending during World War II.</p> Signup and view all the answers

    What is the primary difference between GNP and GDP?

    <p>GNP measures production value based on nationality while GDP measures it based on location.</p> Signup and view all the answers

    What is a key feature of money market mutual funds?

    <p>They buy a collection of short-term, low-risk securities.</p> Signup and view all the answers

    How do high reserve requirements affect banks?

    <p>They decrease the bank's ability to lend money.</p> Signup and view all the answers

    Which of the following stages is NOT part of the consumer decision-making process?

    <p>Interest generation</p> Signup and view all the answers

    What does brand equity refer to?

    <p>A brand’s reputation and consumer recognition.</p> Signup and view all the answers

    Which social media platform is characterized by a visually-driven content focus and high engagement?

    <p>Instagram</p> Signup and view all the answers

    What risk is associated with low prices set to maximize market share?

    <p>Predatory pricing</p> Signup and view all the answers

    What principle is NOT a reason why ethics matter in marketing?

    <p>Promotes aggressive competition</p> Signup and view all the answers

    Which step is NOT part of the product development process?

    <p>Advertising campaign creation</p> Signup and view all the answers

    What describes a behavioral market segment?

    <p>Segmented by purchasing patterns and behaviors.</p> Signup and view all the answers

    What is NOT a characteristic of effective digital marketing strategies?

    <p>Guarantees high conversion rates.</p> Signup and view all the answers

    Which of the following is an example of legal price discrimination?

    <p>Setting different prices for first-class vs. economy airline tickets.</p> Signup and view all the answers

    Which of the following strategies would typically be included in a marketing plan?

    <p>Conducting market research</p> Signup and view all the answers

    Which financial model estimates all cash flows available to equity shareholders after paying capital and operating expenses?

    <p>Free Cash Flow Model</p> Signup and view all the answers

    What does 'excess earnings' refer to in finance?

    <p>Actual earnings minus expected earnings</p> Signup and view all the answers

    Which type of risk affects all investments in the market and cannot be diversified away?

    <p>Market risk</p> Signup and view all the answers

    Preferred stock is considered moderately risky due to its susceptibility to what financial factor?

    <p>Interest rate fluctuations</p> Signup and view all the answers

    What is a key characteristic of a savings account as a financial instrument?

    <p>Low risk, low return</p> Signup and view all the answers

    What is a characteristic of a dual class share structure?

    <p>Allows public capital access without losing control</p> Signup and view all the answers

    What is one key characteristic that must be present for a company to be considered a public company?

    <p>They must file reports with the SEC</p> Signup and view all the answers

    If interest rates decrease, what happens to the present value of future cash flows?

    <p>It increases</p> Signup and view all the answers

    Which of the following best defines the Glass Ceiling?

    <p>A barrier faced by women when receiving promotions</p> Signup and view all the answers

    Which fund involves financing for startup companies and has a high risk-high return profile?

    <p>Venture Capital Fund</p> Signup and view all the answers

    What are the components classified under M1 in the money supply?

    <p>Cash and checkable deposits</p> Signup and view all the answers

    What is typically true about corporate bonds compared to common stocks?

    <p>Corporate bonds are riskier due to potential bankruptcy</p> Signup and view all the answers

    What is a primary function of the Federal Reserve?

    <p>To supervise and regulate financial institutions</p> Signup and view all the answers

    Which of the following is a primary function of managers?

    <p>Organizing</p> Signup and view all the answers

    How is a convertible bond defined?

    <p>A bond that can be changed into stock</p> Signup and view all the answers

    How does a decrease in the Federal Funds Rate typically affect the economy?

    <p>It leads to lower interest rates on loans and stimulates borrowing</p> Signup and view all the answers

    What best describes the concept of empathy in leadership?

    <p>Recognizing and understanding others' emotions</p> Signup and view all the answers

    What mechanism do banks use to profit from the Federal Funds Rate?

    <p>Borrowing at low rates and lending at higher rates</p> Signup and view all the answers

    What does the term 'Time Value of Money' imply?

    <p>A dollar today is worth more due to potential earning capacity</p> Signup and view all the answers

    Bid-ask spreads are generally narrower for which type of securities?

    <p>Highly liquid securities</p> Signup and view all the answers

    Which of the following best describes 'Future Value'?

    <p>The value of a current sum of money at a specified point in the future</p> Signup and view all the answers

    What type of risk is associated with the possibility of not receiving expected cash flows from a bond?

    <p>Credit risk</p> Signup and view all the answers

    When a company is described as being on the 'Glass Cliff', what situation does this indicate?

    <p>Women are often placed in leadership roles when a company is failing</p> Signup and view all the answers

    What are Debt Securities generally used for?

    <p>To derive cash flows through interest payments</p> Signup and view all the answers

    Which market is known for trading shares of public companies?

    <p>Stock exchanges like the New York Stock Exchange</p> Signup and view all the answers

    What is a liquidity risk associated with securities?

    <p>Difficulty in selling an asset quickly without incurring major losses</p> Signup and view all the answers

    What is the Federal Funds Rate primarily used for?

    <p>To influence the short-term borrowing costs between banks</p> Signup and view all the answers

    Which statement regarding the Apple credit card is correct?

    <p>Men had a higher credit limit on Apple credit cards.</p> Signup and view all the answers

    What is an example of form utility in service operations?

    <p>A movie theater providing seating and projection equipment for films.</p> Signup and view all the answers

    What type of layout allows for flexibility in handling a wide variety of products?

    <p>Process layout.</p> Signup and view all the answers

    Which aspect does NOT contribute to quality planning?

    <p>Increasing production speed.</p> Signup and view all the answers

    The concept of 'veracity' in big data refers to what?

    <p>The accuracy and quality of the data.</p> Signup and view all the answers

    What is a disadvantage of an assembly line layout?

    <p>Inability to adapt to product changes.</p> Signup and view all the answers

    Which distribution channel is characterized by a direct transfer of products from producer to consumer?

    <p>Direct channel distribution.</p> Signup and view all the answers

    Which element is NOT a characteristic of big data?

    <p>Integrity.</p> Signup and view all the answers

    Which act is primarily focused on curbing the negative impact of conflict minerals mining?

    <p>Dodd-Frank Act.</p> Signup and view all the answers

    In which layout does production occur at a fixed geographic location with resources brought to that site?

    <p>Fixed-position layout.</p> Signup and view all the answers

    Which of the following is an example of unstructured data?

    <p>Customer comments on social media.</p> Signup and view all the answers

    What is an advantage of a product layout in manufacturing?

    <p>Increased production speed.</p> Signup and view all the answers

    What does capacity planning address?

    <p>Current and future capacity requirements for customer demand.</p> Signup and view all the answers

    Which of the following best represents retail distribution?

    <p>Purchasing groceries at a convenience store.</p> Signup and view all the answers

    Study Notes

    Business Fundamentals

    • Business Definition: A business is an organization engaged in the activity of producing or supplying goods or services.
    • Macro Factor Assessment: PESTEL analysis (Political, Economic, Sociocultural, Technological, Environmental, Legal) is used to assess factors affecting an industry and business.
    • Cultural Environment: Key aspects include social orientation, power orientation, uncertainty orientation, goal orientation, and time orientation.

    Business and Society

    • Stakeholders (Internal): Employees, managers, owners.
    • Stakeholders (External): Suppliers, society, government, creditors, shareholders, customers.
    • ESG Reporting: Environmental, Social, and Governance reports provide a framework for companies to disclose their impact on these areas. Examples include Patagonia.
    • CSR (Corporate Social Responsibility): A broader look at sustainability, encompassing social and environmental considerations. Example: Apple's past CSR practices.
    • Case Studies: Apple's poor CSR record, a Foxconn worker suicide, and the Argus Farm model showcase real-world situations and ethical considerations.

    Organizational Structure

    • Sole Proprietorship: Complete control, no double taxation, but unlimited liability.
    • Partnership: No double taxation, but unlimited liability.
    • LLC (Limited Liability Company): Limited liability, no double taxation, continuity, but less control.
    • Corporation: Limited liability, but double taxation.
    • Cooperative: No double taxation, but lack of continuity.
    • Non-profit: Intrinsic rewards, longer lifespan, but no profit, requires volunteers.
    • Corporate Structure Example: Alphabet's structure, including a dual class share structure.
    • Public Company: Must have public securities, trade on exchanges (NYSE), and file with the SEC.
    • Public Debt/Equity: Companies raise money through various sources (bank loans, investor funds).
    • Glass Ceiling/Glass Cliff: Barriers and challenges for women for career progression.

    Understanding Finance

    • Characteristics of Money: Portable, divisible, durable, and stable.
    • Functions of Money: Medium of exchange, store of value, and measure of worth.
    • Monetary Aggregates (M1/M2): M1 (cash, checkable deposits, traveler's checks) represents the economy's actual purchasing power. M2 includes M1 plus time deposits.
    • The Federal Reserve (The FED): The US central bank. Key functions include conducting monetary policy, maintaining financial stability, supervising financial institutions, and promoting consumer protection.
    • Federal Funds Rate: The rate banks charge each other for overnight borrowing. The rate set by the FOMC (Federal Open Market Committee).
    • Time Value of Money: A dollar today is worth more than a dollar in the future due to potential earnings. This is a fundamental concept in financial decision-making.

    Valuing Securities

    • Debt Securities (Bonds): Valued by assessing cash flows, timing of future payments, and uncertainty associated with risks (credit risk, interest rate risk, etc.).

    • Equity Securities (Stocks): Valued by various models, including dividend discount models, free cash flow models, and earnings multiple models (e.g., Price-to-Earnings ratio).

    • Risk-Return Relationship: Higher risk investments often yield higher rewards.

    • Diversification: Important for managing risk.

    • Stock Examples: Common stock represents ownership in a company.

    • Bond Examples: Corporate bonds are issued by companies. Treasury bonds are low-risk.

    • Other Investments: Savings accounts, money market funds, municipal bonds, real estate investment funds, convertible bonds, preferred stock, venture capital.

    Clifton Strengths and Leadership (and more)

    • 12 Competencies at Ross School of Business: communication, compassion & empathy, critical thinking, ethical reasoning, global perspective, etc.
    • Empathy: Recognizing and understanding emotions. Compassion: empathy with action to alleviate suffering.
    • Management Functions: Planning, organizing, controlling, and leading.

    Additional Business Topics

    • Business Strategy: Choices influencing competitive advantage include what a company wants to be (aspirations), where it will compete, and how it will compete against competitors in that industry.

    • Marketing Mix (5 Ps): Product, Price, Place, Promotion, and People.

    • Consumer Decision Making Process: Need recognition, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation.

    • Brand Equity: A brand's reputation.

    • Price Discrimination: Examples include different pricing for different customer groups.

    • Operations and Decision Making: Service vs goods operations, utilization of value-adding utility, capacity/layout/methods planning for increased efficiency, quality planning.

    • Big Data Analysis: Characteristics of big data (volume, velocity, variety, veracity, value).

    • Distribution Channels: Direct, retail, wholesale, via agents/brokers.

    • Accounting Information: Balance sheet, income statement, statement of cash flows. Sources of accounting information for public companies.

    • Networking: Identifying goals, targeting key people, and focusing on quality interactions.

    • Risk Management: Prevention, control, and transfer strategies. Examples include financial and societal crises.

    • Government Policy and Politics: Relationship between branches of government.

    • HRM (Human Resource Management): Attracting, retaining, and developing talent. Legal aspects include equal employment, compliance, and compensation.

    • Pay Gap and Union Membership: Trends observed in various economies.

    • GM Strike (case study): Highlights worker/management negotiations, causes, and impacts.

    • Future Career Paths: Emerging business careers related to data science, sustainability, FinTech, and emerging technologies.

    • The National Debt: Size and impacts, and comparison to GDP.

    • Personal Finance: Steps for developing a financial plan, including assessing current finances, establishing goals, and implementing an action plan.

    • Cryptocurrency: An example of high-risk, high-reward investment options.

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    Description

    Explore the essentials of business definitions, stakeholder analysis, and the cultural environment in which businesses operate. This quiz also covers the importance of ESG reporting and Corporate Social Responsibility. Enhance your understanding of the macro factors influencing businesses today.

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