MGT-402 TB Final MCQ (2) PDF

MGT-402 TB-FINAL EXAM Done By: Yaser Abdullah-SEU-Al-Ahsa-2022 Chapter 8 New Business Planning Process: Feasibility Analysis, Business Modeling, and Crafting a Winning Business Plan 1) For entrepreneurs, a business plan is: A) a systematic, realistic evaluation of a venture's chances for success in the market. B) a way to determine the principal risks facing the venture. C) a game plan for managing the business successfully. D) All the above 2) A business plan performs a number of functions including: A) identifying how many employees will be needed in the business start-up phase. B) attracting capital for the start-up. C) providing the entrepreneur with a plan for managing inventory. D) providing the basis for purchasing property and casualty insurance for the new company. 3) The ________ becomes the document that summarizes the analysis that has been done to justify a new business. A) business plan B) cash budget C) pro forma D) financial statement 4) A business plan: A) is developed through an intuitive process by which the entrepreneur records his/her plans for the business in the future. B) focuses on the internal elements of the business. C) forces an entrepreneur to think a business idea through, considering both its positive and its negative aspects. D) is a strategic plan for a business that must be supplemented by operational plans once financing is secured. 5) A well-developed business plan provides the entrepreneur with a number of benefits, such as: A) a way to identify probable financial backers. B) a valuable tool for recruiting management to help in running the business. C) assisting the entrepreneur in going public with his/her new venture on the stock market. D) determining the principal risks confronting the business. 1 6) The primary purpose of building a business plan is to: A) raise capital. B) attract potential employees. C) provide direction, to create a "target" to shoot for. D) meet SEC requirements designed to protect lenders and investors. 7) The second essential purpose for creating a business plan is: A) to guide the operation of the company by charting its future course and devising a strategy for following it. B) to attract lenders and investors. C) to file with the SEC before making a public stock offering. D) to attract potential managers and employees to run the new venture. 8) Potential investors tend to believe that if an entrepreneur can't develop a good plan: A) he/she is probably the action-oriented sort of person they need running a business. B) he/she needs to hire a consultant to write the plan for him/her. C) he/she probably lacks the discipline to run a business. D) then the entrepreneur is just like the majority of entrepreneurs and will probably do quite well. 9) Which one of the following is not a "test" that an entrepreneur's business plan must pass? A) The reality test B) The competitive test C) The value test D) The ability test 10) The real value in preparing a business plan is: A) in attracting experienced management talent to help grow the business. B) in the creative process the entrepreneur has to go through. C) in identifying viable funding sources while "fleshing out" the business concept. D) None of these 11) A business plan: A) reduces the risk and uncertainty involved in starting a new company. B) is a guarantee of success for the small company. C) should be done by professional writers in consultation with the owner. D) should be kept in outline form to avoid over structuring the company. 12) The ________ is the first part of the business plan. It summarizes all the relevant points of the deal, but it should be the last part written. A) executive summary B) mission statement C) industry analysis 2 D) marketing strategy 13) The ________ expresses the entrepreneur's vision for the company and what he/she hopes it will become. A) executive summary B) mission statement C) industry analysis D) marketing strategy 14) The ________ highlights significant financial and operational events in the company's life and should concentrate on the company's accomplishments. A) executive summary B) company history C) business and industry profile D) marketing strategy 15) The ________ acquaints lenders and investors with the nature of the business and the general goals and objectives of the company. A) executive summary B) company history C) business and industry profile D) marketing strategy 16) ________ are long-range, broad statements of what the company plans to accomplish in the distant future, and they guide the overall direction of the company. A) Policies B) Goals C) Procedures D) Objectives 17) The company's overall direction and answer to the question, "Where do I want the company to be in 3 to 5 years?" is answered in this section of the business plan. A) executive summary B) company history C) business and industry profile D) marketing strategy 18) ________ are short-term, specific targets which are attainable, measurable, and controllable. A) Objectives B) Policies C) Goals 3 D) Standard operating procedures 19) The business and industry profile section of the business plan includes: A) significant financial and operational events in the life of the company. B) how the entrepreneur intends to accomplish the company's goals and objectives. C) the nature and characteristics of the target market. D) the historical evolution of the market, market size, ease of entry, etc. 20) A solid business plan is marked by a number of characteristics including: A) broad, general market research on the overall industry and business environment. B) a description of the management team. C) a minimum of financial detail. D) an optimistic financial projection and understandable risk statement. 21) Discussion of profitability and anticipated profitability of firms in the market segment, along with the entry, exit, and merger of those firms, is all part of the ________ section of the business plan. A. business strategy B. company history C. business and industry profile D. marketing strategy 22) In the business strategy section of the business plan, the owner needs to explain to investors: A) significant financial and operational events in the life of the company. B) how the entrepreneur intends to accomplish the company's goals and objectives. C) the nature and characteristics of the target market. D) the historical evolution of the market, market size, ease of entry, etc. 23) Kyoto is writing a description of her new venture's product line and how it compares to her competitors' product lines. She is writing the ________ portion of her business plan. A) description of her firm's product B) marketing strategy C) competitive analysis D) business strategy 24) Defining the target market's potential and describing its characteristics is part of the: A) description of the product line. B) marketing strategy portion of the business plan. C) competitive analysis. D) business strategy section of the business plan. 25) Proving that a profitable market exists involves: 4 A) proving that customers in the marketplace have a need for the good or service and are willing to pay for it. B) honestly comparing your firm's products with a competitor's products, showing your advantages. C) explaining how you will achieve your business objectives and market share goals. D) showing the linkage between your plan of operation and your financial profitability. 26) An effective market analysis identifies: A) your product's competitive advantage. B) how you will achieve your market goals, what methods will be used. C) the officers'/owners' resumes. D) how the product will be advertised. 27) An explanation of how the product will be distributed is contained within the: A) description of the product line. B) marketing strategy portion of the business plan. C) competitive analysis. D) business strategy section of the business plan. 28) The focus of the competitor analysis section of the business plan is to: A) demonstrate the existence of the market for your product. B) show that your experienced management team is better than your competitors'. C) demonstrate your company's advantage over competitors. D) describe your overall product line. 29) Investors look for which of the following when reviewing the experience of the management team of a new venture? A) Assets that can be used as collateral for the loan/investment B) Experience, talent, and integrity C) Plans for keeping the management team in place D) A hiring strategy that has the customer clearly in focus 30) The organization chart is described in which section of the business plan? A) The plan of operation B) The resumes of the officers/owners C) The business strategy D) The executive summary 31) The plan of operation of the company within the business plan should detail: A) the experience of the management team. B) the production process for the product being sold. C) the financial assets of each of the officers. 5 D) Plans for keeping the important officers in place with the company. 32) When creating financial forecasts in a business plan for a proposed venture, an entrepreneur should: A) Be sure that all forecasts are realistic. B) embellish all forecasts to make the numbers look really impressive. C) include any assets of the officers/owners that can be used as collateral. D) list all previous loans which are in default. 33) Which of the following statements is true? A) The useful life of the financed asset must be less than the maturity of the loan. B) An entrepreneur should try to camouflage any weaknesses in the small business. C) Projected financial statements should prove the company's ability to repay the loan. D) Officers' personal assets that can be used as collateral must be included in the financial statement. 34) The loan proposal portion of the business plan should include: A) three sets of forecasts: optimistic, realistic, and pessimistic. B) A realistic timetable for repayment or for investors to exit. C) pro forma for two to three years. D) a listing of anyone who owns more than 20% of the business. 35) The process of testing the business model on a small scale before committing serious resources to launch a business that might not work is called: A) benchmarking. B) Business prototyping. C) scaling. D) lean modeling. 36) Business plans need to pass three tests: A) the financial test, the market test, and the management test. B) the appearance test, the substance test, and the concept test. C) The reality test, the competitive test, and the value test. D) the presentation test, the content test, and the application test. 37) An external test of a business plan that revolves around proving that a market exists is the: A) competitive test. B) consumer test. C) value test. D) reality test. 38) When presenting the business plan it is important to: A) show enthusiasm for the venture. B) use visual aids. 6 C) avoid technical jargon. D) Do all of these. 39) The C of the five Cs that is a synonym for "cash flow" is: A) capital. B) character. C) collateral. D) Capacity. 40) The most common reason cited by banks for rejecting small business loans is: A) poor credit history. B) Undercapitalization or too much debt. C) lack of collateral. D) insufficient cash flow or poor profitability. 41) Any assets pledged to the bank as security for repayment of the loan are the ________ of the five Cs. A) Collateral B) capacity C) capital D) conditions 42) The intangible C that lenders examine in evaluating the business plan is that of: A) capital. B) Character. C) collateral. D) capacity. 43) The C of the five Cs that relates to the circumstances relating to the business, such as potential growth in the market, form of ownership, location, etc., is called: A) capital. B) capacity. C) Conditions. D) character. 44) The executive summary should contain which of the following information? A) A brief statement of the financial needs of the business and what the money would be used for B) A short description of potential buyers C) A brief history of the business D) A complete description of your business 45) A description of the key factors that will dictate the success of your business quality, price competitiveness, etc. should be contained in the ________ section of the business plan. 7 A) market analysis B) executive summary C) Description of the business D) competitor analysis 46) The form of ownership in your company should be explained in the ________ portion of the business plan. A) business strategy B) Plan of operation C) executive summary D) market analysis 47) You should identify your key people, explain their backgrounds and what they bring to the business, in: A) the executive summary. B) The description of the management team. C) the strategic plan. D) the business strategy. 48) Your cash budget and an explanation of how much money you need to make your company and product a long-term success are the subject matter of the: A) Financial plan. B) strategic plan. C) business strategic plan. D) strategic action plan. 49) A ________ is what a customer gains from the product or service feature. A) feature B) bonus C) discount D) Benefit 50) One technique involves ________, in which entrepreneurs test their business models on a small scale before committing serious resources to a business that might not work. A) a test run B) Business prototyping C) duplicate business models D) model prototyping 51) An executive summary should be: A) a snapshot of the entire plan. 8 B) 3 to 5 pages. C) written first. D) All the above 52) The phrase, "avoid the off-the-shelf, 'cookie-cutter' approach that produces lookalike plans" means: A) avoiding a business plan that looks ordinary. B) that every business plan is unique. C) the business plan should reflect the excitement of the entrepreneur. D) All the above 53) An executive summary should: A) explain the basic business model and the problem the business will solve for customers. B) briefly describe the owners and key employees, target market(s), and financial highlights. C) briefly describe the company's competitive advantage. D) All the above 54) A great source that profiles a variety of industries and offers projections for the future trends is: A) the Handbook. B) an encyclopedia. C) The Beige Book. D) the Blue Book. 55) Proving that a profitable market exists involves: A) showing customer interest. B) documenting market claims. C) Both A and B D) Neither A nor B 56) A business plan presentation should cover: A) the company's background and its products or services with a market analysis and a description of the opportunities it presents. B) the company's competitive edge and the marketing strategies it will use to promote that edge. C) the management team and its members' qualifications and experience. D) All the above 57) A ________ is a descriptive fact about a product or service. A) feature B) product summary C) benefit D) None of the above 9 58) What is the synonym for capacity? A) Capital B) Cash flow C) Collateral D) Credit 59) What is the competitive test? A) It evaluates the company's relative position to its key competitors. B) It identifies the competitors only. C) It finds their address and phone numbers. D) None of the above 60) Which statement is correct? A) Lenders and investors are familiar with industry cost structures. B) A lender's main consideration in granting a loan is the reassurance that the applicant will repay. C) An investor's major concern is earning a satisfactory rate of return. D) All the above 61) Which financial forecast should be realistic? A) Pessimistic B) Most likely C) Optimistic D) All the above 62) Competitor's analysis should identify: A) Who are the company's key competitors? B) What are their strategies? C) What images do they have in the marketplace? D) All the above 63) One effective documentation technique involves ________, in which entrepreneurs test their business models on a small scale before committing serious resources to a business. A) forecasting B) business prototyping C) collateral D) None of the above 10 Chapter 9 Building a Bootstrap Marketing Plan 1) A business plan for the small business owner: A) is of relatively little importance due to the dynamic nature of the marketplace. B) is synonymous with the marketing plan. C) tends to stress how the entrepreneur will operate rather than detailing what he/she wants to accomplish. D) Contains both a marketing plan and a financial plan. 2) ________ is the process of creating and delivering desired goods and services to customers and involves all of the activities associated with winning and retaining loyal customers. A) Marketing B) Personal selling C) Promotion D) Advertising and public relations 3) Small businesses can compete with larger rivals with bigger budgets by employing unconventional, low-cost creative techniques known as: A) market research. B) astonishing customer service. C) bootstrap marketing techniques. D) psychographics. 4) The focus of the small company's marketing plan is: A) its product or service. B) The customer. C) attracting capital. D) an evaluation of key competitors. 5) The marketing plan builds a strategy for success: A) from the customer's point of view. B) as described by the marketing manager. C) based on eliminating all competition. D) by focusing on product development and market management. 6) The marketing plan should include certain key objectives, such as: A) determining product costs through market research. B) Pinpointing the specific target markets a small business will serve. C) determining what costing strategies to use. D) discovering what the company's ETDB index is. 11 7) Shifting patterns in the age, income, education, race, and other characteristics of the population are the subject of ________ and exert a potent force on a company's marketing plan. A) psychographics B) Geographics C) Demographics D) geo-demographics 8) Entrepreneurs who recognize demographic, social, and cultural trends as they emerge have the opportunity to ________ their companies from the competition in meaningful ways. A) integrate B) Differentiate C) placate D) mediate 9) Market research: A) Provides the information that is foundational to the marketing plan. B) is the process used to set the goals and objectives of the marketing plan? C) is prohibitively expensive for the small business owner. D) is relatively unimportant to the small business owner if the owner is close to his/her customers. 10) Market research answers what important question for the small business owner? A) How shall I set up my distribution system? B) What should my goals and objectives be in my marketing plan? C) Who are my customers and what are they looking for? D) What form of business ownership would be most effective in this market? 11) The primary goal of marketing research is to: A) discover potential competitors. B) Reduce the risks associated with business decisions. C) determine how to allocate distribution resources. D) help management choose the appropriate promotional tool. 12) The marketing goal of a small business is to treat each customer as a(n): A) individual. B) group. C) profit center. D) cost center. 13) John wants to answer the question, "What drives my customers' buying behavior?" The best information to address this question comes from: A) demo/geographics data. 12 B) geographics data. C) demographics data. D) Psychographics data. 14) When it comes to gathering market research on customers, most small companies tend to be: A) as good at it as large companies. B) at a severe disadvantage in comparison to large companies. C) Data rich, lots of facts, but information poor, little in a useful form. D) less effective at defining the research problem than larger companies. 15) One-to-one marketing is a marketing strategy that: A) Gathers data on individual customers and then tailors an appeal to their needs and tastes. B) uses technology to make customers feel like they are being treated special. C) focuses on the use of personal selling and consultative advising of customers. D) relies heavily on geographic data but ignores demographic and psychographic data. 16) Market research for a small business can be: A) arbitrary. B) Informal. C) random. D) haphazard. 17) Effective one-to-one marketing involves: A) identifying your best customers. B) treating each customer as an individual. C) developing a marketing plan designed specifically to appeal to their customer needs, tastes, and preferences. D) All of these 18) ________ is a process in which computer software that uses statistical analysis, database technology, and artificial intelligence finds hidden patterns, trends, and connections in data so that business owners can make better marketing decisions and predictions about customer's behavior. A) Customer relationship management B) Data mining C) Data discovery D) Simulation 19) Most marketing experts contend that the greatest marketing mistake small businesses make is: A) Failing to identify the target market. B) spending too little on advertising. C) underpricing their products and services. D) spending too little on quality improvement. 13 20) When it comes to the target market, most successful businesses: A) have broad target markets, permitting them to offer a wide variety of products. B) have little concern for the image of their company, focusing solely on how their products meet target market needs. C) have well-defined "portraits" of the customers they want to attract. D) don't have a clue as to their target market but put forth enough effort to succeed anyway. 21) The key to marketing success is: A) economy of scale in promotion by creating broad-based ad campaigns. B) Understanding customers' unique needs, wants and preferences. C) the use of direct-marketing and e-commerce. D) catering to teenagers. 22) Clementine, Data Scope Pro, Goldmine, and MineSet are what type of software packages? A) Customer relationship management B) Data mining C) Data discovery D) Word processing 23) A company's competitive edge is: A) dependent on the availability of its products. B) largely a function of its pricing strategies. C) the superiority of its market research. D) Based on customers' perception of its products and services. 24) One "natural" advantage small businesses have over large businesses, which can be a significant competitive advantage, is: A) relationship marketing. B) their ability to conduct market research. C) their lower costs. D) their ability to serve many highly diverse target markets. 25) ________ puts the customer at the center of a company's thinking, planning, and action and shifts the focus from a product or service to customers and their needs and wants. A) Guerilla marketing strategy B) Data mining C) Customer relationship management (CRM) D) Entertailing 26) ________ puts the customer at the center of a company's thinking, planning, and action and shifts the focus from a product or service to customers and their needs and wants. 14 A) Pull strategy B) Entertailing C) Customer relationship management (CRM) D) Interactivity 27) The majority of customers who stop patronizing a particular store do so because: A) its prices are too high. B) its quality is too low. C) An indifferent employee treated them poorly. D) it failed to advertise enough. 28) ________ is drawing customers into a store by creating a kaleidoscope of sights, sounds, smells, and activities, all designed to entertain and, of course, to sell. A) Retailing B) Entertailing C) Etailing D) Merchandising 29) Companies do a number of things to focus on their customers, including: A) fixing customer complaints quickly. B) conducting market research on what superior customer service is. C) offering quality products at low prices. D) implementing a TCM management system in their production facility. 30) To build an effective customer service program, it is important to: A) offer low prices. B) train key employees to watch for and intervene when there are problems. C) swiftly discipline employees who mistreat customers. D) Let managers wait on customers occasionally. 31) The worst marketing catastrophe to befall any business would be to: A) encourage customers to complain and have employees give management feedback on the complaints. B) Have great advertising and poor-quality products. C) have poor customer service and a highly effective promotional campaign. D) have a great product and an inaccessible location. 32) The total quality management (TQM) concept: A) Strives to achieve quality not just in the product or service itself, but in every aspect of the business and its relationship with the customer. B) relies on quality inspections through an army of quality control inspectors. C) focuses on reducing the time it takes to fulfill a customer's request for a product. 15 D) is built on market research. 33) ________ recognizes that any improvement in quality may improve a company's competitive ability. A) Customer service B) Return on quality C) Total quality management D) Total customer satisfaction 34) Companies with strong reputations for quality follow certain guidelines, such as: A) Establishing long- term relationships with suppliers. B) fostering individual effort and pride of workmanship. C) rewarding employees for compliance to rules and procedures. D) building an extensive quality inspection system with many quality inspectors. 35) Studies show that customers want ________ from businesses almost more than anything else. A) quality B) low cost C) cutting edge technology D) Convenience 36) TCM is the acronym for: A) total customer management. B) Time compression management. C) total customer marketing. D) total compression management. 37) Small businesses are able to maintain a leadership role in innovation by: A) using their size, flexibility, and speed to their advantage. B) spending much more money on R & D than large companies do. C) foreseeing trends better and far enough in advance that they can spread innovation costs over several years. D) making better use of technology than large companies. 38) A key to effective innovation by the entrepreneur is: A) dedicating at least 20% of pre-tax revenues to R & D. B) Always looking for new product and service ideas. C) hiring managers with a track record for innovation. D) None of these 39) Small companies with limited financial resources can often use ________ as a way to differentiate themselves from larger competitors. A) innovation 16 B) lower prices with higher quality C) high price and high quality D) Customer service 40) Numerous surveys have concluded that the most important element of service is: A) the personal touch. B) convenient business hours. C) speedy transactions. D) innovative product design. 41) Time compression management (TCM) involves: A) speeding new products to market. B) enhancing the quality of existing products. C) decreasing the time, it takes a product to move from introduction to the maturity stage of the product life cycle. D) shortening the salesclerks’ response time to customers entering the retail store and then being served. 42) The primary opportunity for time compression management (TCM) lies in its application to: A) the purchasing process. B) the production process. C) the administrative process. D) the marketing process. 43) ________ refers to developing, maintaining, and managing long-term relationships with customers so that they will want to keep coming back. A) Customer relationship management B) Customer retention management C) Customer management software D) Customer reassurance management 44) Which strategy allows a small company to maximize the advantages of its smallness and to compete effectively even in industries dominated by giants? A) Grand market strategy B) Mass strategy C) Niche strategy D) None of the above 45) The cost of marketing a product is highest in the: A) introductory stage. B) growth and acceptance stages. C) maturity stage. D) saturation stage. 17 The time span between stages in the product life cycle: A) generally, runs about six months to one year per stage. B) is highly influenced by the amount of promotion that is done. C) depends entirely on the type of products involved. D) depends on the types of market strategy the small business owner is pursuing. 47) The product life cycle concept means that small businesses must: A) constantly be involved in product innovation. B) track demographic and psychographic trends carefully. C) create both place and time utility if they are to survive. D) use a market penetration strategy if they are to be successful. 48) The most common channel of distribution for consumer goods is: A) manufacturer → consumer. B) manufacturer → retailer → consumer. C) manufacturer → wholesaler → retailer → consumer. D) manufacturer → broker → consumer. 49) The right price for a product depends on which factors? A) A small company cost structure B) The desired image the company wants to create in its customers' minds C) An assessment of what the market will bear D) All of the above 50) Free trial offers, free delivery, lengthy warranties, and money back guarantees are examples of: A) promotion. B) product differentiation. C) Non-price competition. D) customer discounts. 51) ________ is the process of creating and delivering desired goods and services to customers and involves all of the activities associated with winning and retaining loyal customers. A) Retailing B) Selling C) Marketing D) None of the above 52) Bootstrap marketing also is sometimes known as: A) ambush marketing. B) target marketing. C) customer marketing. 18 D) Guerilla marketing. 53) One of the objectives of a bootstrap marketing plan is to find the ________ in the market. A) "pain points" B) "entry point" C) "skimming point" D) "unique point" 54) One of the objectives that a bootstrap marketing plan should accomplish is: A) it should pinpoint the target market. B) it should determine customer needs, wants and characteristics. C) it should identify company vendor potential. D) Both A and B 55) One of the first steps in building a marketing plan is identifying a small company's ________, the group of customers at whom the company aims its products and services. A) target market B) competitors C) customers D) Both A and C 56) ________ is the vehicle for gathering the information that serves as the foundation for the marketing plan. A) Target market identification B) Market research C) Banker identification D) Competitive analysis 57) A ________ is a small number of customers who give you feedback on specific issues in your business— quality, convenience, hours of operation, service, and so on. A) survey B) questionnaire C) focus group D) All of the above 58) Customer surveys and questionnaires should: A) be short. B) not give biased results. C) use simple ranking systems. D) All of the above 59) Surveys, questionnaires, and focus groups are considered to be: 19 A) primary research. B) secondary research. C) data collation. D) All of the above 60) ________ is a process in which computer software that uses statistical analysis, database technology, and artificial intelligence finds hidden patterns, trends, and connections in data so that business owners can make better marketing decisions and predictions about their customers' behavior. A) Demographic collection B) Target marketing C) Data mining D) None of the above 61) What drives my customers' buying behavior? Are they receptive to new products or are they among the last to accept them? What values are most important to them? These questions are to identify: A) psychographic data. B) geographic data. C) demographic data. D) All of the above 20 Chapter 10 Creative Use of Advertising and Promotion 1) In reality, advertising: A) is a "luxury expense" to be undertaken only when the budget permits. B) requires a large budget to be successful. C) is an investment in the future; without steady advertising the customer base will dry up. D) is relatively ineffective in increasing sales but it does increase customer awareness. 2) Tami is developing a promotional campaign for her small business. The first step in this process is to: A) choose an advertising agency to assist her. B) determine how much she can spend. C) identify her target audience. D) define her unique selling proposition. 3) Effective ads are built on: A) a clear picture of the competition's products. B) a multimedia approach. C) a unique selling proposition. D) clearly defined features of the product. 4) The most meaningful unique selling proposition: A) identifies as many product features as possible. B) stresses price. C) counters the strengths of the competition. D) describes the primary benefit of the product. 5) The choice of advertising medium is primarily determined by: A) what media the competition uses. B) what media the industry focuses on. C) the target audience and the message. D) the unique selling proposition and budget. 6) There are a number of tips a small business owner can follow to build effective advertising, including: A) run one advertisement at a time. B) limit the content of each ad. C) focus on short-term advertising goals. D) All of these 21 7) ________ is any sales presentation that is nonpersonal in nature and is paid for by an identified sponsor. A) Promotion B) Advertising C) Personal selling D) Publicity 8) By engaging in ________, entrepreneurs can support and promote a charity and raise their company's visibility at the same time. A) relationship marketing B) advertising C) personal selling D) cause marketing 9) When Chapters, a small bookstore, donates a dollar for each book sold to help promote reading among children, Chapters is using: A) sales promotion. B) advertising. C) cause marketing. D) personal selling. 10) A recent study of top salespeople found that they: A) do most of the talking during the sales call. B) work from the customer's perspective and use past "success stories." C) tend to be indirect, taking their time to get to the point with the customer. D) see themselves as vendors and tend to not leave sales materials with the customer. 11) ________ is the personal contact between salespeople and potential customers that comes from sales efforts. A) Publicity B) Personal selling C) Specialty advertising D) Advertising 12) The ________ cost of an advertising medium compares the actual dollar cost of an ad with the number of potential customers it reaches. A) relative B) continuous C) absolute D) comparative 13) When selecting the advertising vehicle the small business owner should ask him/herself: 22 A) What are the characteristics of my product? B) Who are my target customers? C) What medium will best support my sales force? D) What can I legally say in my advertisements? 14) Which of the following media account for the greatest portion of advertising expenditures? A) Internet B) Radio C) Television D) Magazines 15) Newspaper advertising is characterized by: A) broad territory coverage. B) high costs. C) long ad life. D) prompt responses to the ads. 16) Newspapers have a number of disadvantages for the small business, such as: A) poor timeliness; it's already old news. B) high expense. C) lack of prominence of the ads. D) readership of primarily older women. 17) Radio has a number of advantages for the small business owner, such as: A) friendliness, in that radio ads are more active than print media ads. B) easily measurable results and testable strategies. C) long life span. D) the ability to personalize the ads to the specific customers. 18) Radio: A) is the one medium that customers spend the most time paying attention to. B) can reach nearly any target market. C) is very susceptible to "zapping." D) is the most expensive advertising medium in terms of relative costs. 19) Radio's power as an advertising medium comes from: A) the high production qualities available to the advertiser. B) the long life of its ads. C) its nearly universal presence in society. D) the powerful graphic abilities of the medium. 23 20) One disadvantage of radio as an advertising medium is: A) lack of prominence. B) cost. C) lack of friendliness. D) the need for repetition. 21) Which of the following times would be considered radio "prime time"? A) 7 p.m. to midnight B) 6 a.m. to 10 p.m. C) 4 p.m. to 7 p.m. D) Both A and C 22) If a small business owner wants to use television advertising, he/she should: A) go for national advertising to get the maximum absolute cost advantage. B) try to use cable which costs $200 or less for a 30 second spot. C) consider radio instead because they have identical advantages. D) remember that television is one of the least flexible media. 23) Television ads are most commonly sold in what time increments? A) 20 seconds B) 30 seconds C) 60 seconds D) 15 seconds 24) Flashing from one television channel to another, especially during commercials, is called: A) zapping. B) skipping. C) cluttering. D) zipping. 25) Magazines have a number of advantages for the small business owner, including: A) low cost. B) short closing time. C) high quality ad reproduction. D) prominence of the ads in the medium. 26) Which of the following is a disadvantage of magazine ads? A) The long closing times B) Poor ad quality C) An inability to target a market D) Lack of flexibility 24 27) Which advertising medium offers the greatest ability to selectively target a specific audience? A) Newspaper B) Television C) Direct mail D) Radio 28) Direct mail ads have a number of advantages to them, such as: A) low relative costs. B) long life spans. C) flexibility. D) multiple exposure. 29) The key to the success of direct mail advertising is: A) designing the right envelope. B) the accuracy of the customer mailing list. C) creative use of color and photographs in the mailing. D) using key words such as "free," "hurry," and "savings." 30) A successful direct mail ad is characterized by: A) text written as if it were being spoken. B) thorough text descriptions of the benefit. C) making statements rather than asking questions. D) minimal use of pictures and color, to reduce costs. 31) Which of the following is an advantage of outdoor ads? A) Prominence of the ads B) Narrow reach C) Long exposure D) Flexibility 32) Which of the following is a disadvantage of outdoor ads? A) High absolute and relative costs B) Legal restrictions C) Narrow reach D) Lack of flexibility 33) The best color combination for an outdoor ad is: A) blue on green. B) red on black. C) yellow on orange. D) black on white. 25 34) Transit advertising's advantages include: A) its flexibility. B) the high-quality color reproduction. C) its wide coverage. D) the prominence of display. 35) Transit advertising has several disadvantages, such as: A) legal restrictions. B) high cost. C) low frequency and short exposure. D) the inability to target specific audiences. 36) The typical household receives an average ________ pieces of direct mail annually. A) 52 B) 624 C) 236 D) 354 37) The form of advertising that gives the small business owner a preselected audience and an economical way to make sales calls would be: A) outdoor advertising. B) trade shows. C) directories. D) direct mail. 38) A hardware store giving customers nail aprons and yardsticks emblazoned with its name, address, phone number, logo, and slogan is using which advertising medium? A) Point-of-purchase ads B) Cooperative advertising C) Specialty advertising D) Shared ads 39) An important advantage of specialty advertising is its: A) ability to significantly lower the cost of sales calls. B) low specific costs. C) versatility. D) potentially broad reach. 40) One of the disadvantages of using transit advertising is its: A) limited appeal. B) narrow exposure. 26 C) lack of repeat exposure. D) high cost. 41) Under the ________ method of establishing an advertising budget, the owner sees advertising as a luxury. A) what-is-affordable B) matching competitors C) percentage of sales D) objective-and-task 42) The most commonly used method of establishing an advertising budget for a small business is: A) a percentage of sales. B) spending what competitors spend. C) objective-and-task method. D) what is affordable. 43) The ________ method is the most difficult and least used technique of establishing an advertising budget. A) percentage of sales B) spending what competitors spend C) objective-and-task D) what-is-affordable 44) Under ________, a manufacturer splits the cost of advertising with a small retailer if the retailer features its product. A) cooperative advertising B) shared advertising C) direct advertising D) integrated marketing 45) Timex designs a set of newspaper ads promoting its watches, making them available at no cost to jewelers selling its watches so they can add their names, addresses, and phone numbers. It is using ________ advertising. A) institutional B) generic C) cooperative D) shared 46) In a(n) ________ advertising program, a group of similar businesses forms a "syndicate" to produce "generic" ads that allow the individual businesses to dub in local information. A) cooperative 27 B) shared C) direct D) integrated 47) A successful public relations technique used by local businesses to sponsor and promote fundraising activities of nonprofit groups is called: A) cooperative advertising. B) shared advertising. C) cause marketing. D) integrated marketing. 48) Other cost saving suggestions for advertising expenditures include: A) repeat ads that have been successful. B) hire independent copywriters, graphic designers, photographers, and other media specialists. C) use of identical ads in different media. D) All of the above 49) For advertising to work it should: A) fit into your company's overall market strategy. B) use as much financial resources as possible. C) be part of the firm's operating strategy. D) None of the above 50) A tip for effective advertising is: A) set long-term advertising objectives. B) advertise in all media. C) include many texts in your ads. D) All of the above 51) Before making a sales call, the salesperson sets three objectives. Which one is not an objective? A) The primary objective B) The visionary objective C) The maximum objective D) The minimum objective 52) Floating spots are common in what type of advertising media? A) Radio B) Newspaper C) Magazine D) Television 28 53) Tactics that can help an entrepreneur stimulate positive publicity for the firm are: A) writing news releases and faxing them to the media. B) sponsoring a community project. C) promoting a cause. D) All of the above 54) ________ forces the salesperson to be open-minded and to shoot for the top. A) The primary objective B) The minimum objective C) The visionary objective D) The ultimate objective 55) What advertising media attract a large percentage of the advertising dollars nationwide? A) Newspaper B) Radio C) Internet D) Television 56) To a business owner, the success of a trade show depends on: A) understanding how a specific trade show might contribute to sales. B) evaluating the alternative shows based on both cost and size. C) Both A and B D) selling a lot of products or services in a trade show. 57) ________ refers to a key customer benefits or a product or service that sets it apart from its competition. A) Unique product selling B) Unique selling proposition C) Competitive advantage D) Differentiation 58) The ________ becomes the heart of a company's advertising message. A) USP B) brand equity C) price D) product 59) Which of the following statements is correct? A) Advertising, promotion, and public relations can be effective means of increasing sales by informing customers of the business and its goods and services. B) Advertising, promotion, and public relations can be effective by improving the image of the firm and its products. 29 C) Advertising, promotion, and public relations can be effective by persuading customers to purchase the firm's goods or services. D) All of the above 60) ________ is any sales presentation that is nonpersonal in nature and is paid for by an identified sponsor. A) Personal selling B) Press release C) Advertising D) Marketing 61) Which of the following statements is correct? A) Do not count on sponsorships for your entire advertising campaign. B) It is not necessary to be a dominant sponsor of the event. C) Most sponsorships are free and do not cost the company anything. D) All of the above 62) David started his business a couple of years ago. After several marketing promotions, he decided to establish direct contact between his sales people and the customers. His marketing communication is: A) advertising. B) public relations. C) salesperson sponsorship. D) personal selling. 63) One advantage of personal selling is: A) success is not measured just by sales volume but also by customer satisfaction. B) top salespeople use an indirect approach to close the deal. C) the salesperson knows what the company wants and works for company's perspective. D) All of the above 64) ________ is unsolicited commercial e-mail. A) E-mail advertising B) Banner advertising C) Spam advertising D) Cookie advertising 30 Chapter 11 Pricing and Credit Strategies 1) Tom is working on a pricing strategy for his company's new product line. In order to determine the price ceiling for these products, Tom needs to know: A) what price range will work best. B) what his company's cost structures are. C) What his customers are willing to pay. D) what his competitors are charging. 2) When pricing products, it is important to remember that: A) there is an ideal price that customers will pay for a given product or service. B) once the acceptable price range is found, prices should not be changed again. C) pricing is more an intuitive than a quantitative process. D) A customer orientation in price setting is most important. 3) Small business owners get into trouble when determining their price floor when they: A) focus on what the customer will pay. B) Assume their costs are the same as their competitors'. C) begin to track financial ratios to determine what they are doing. D) use the price floor as the minimum price in their acceptable price range. 4) The final price set by the entrepreneur for the products depends on: A) The desired image for the products. B) the cost structure. C) what customer will pay. D) what competitors are charging. 5) When small manufacturing companies face rapidly increasing raw material costs, they can adopt a number of strategies including: A) pass the increasing costs along to their customers without comment. B) absorb costs for the short term and plan for double price increases in the next pricing cycle. C) reconsider their competitive strategy and seek a niche they can service. D) Emphasize the value their company provides customers. 6) ________ pricing strategy introduces a new product at a low price to gain quick acceptance and extensive distribution in a mass market. A) Penetration B) Skimming C) Discount D) Sliding-down-the-demand-curve 31 7) ________ pricing policy is used to introduce a relatively low-priced good into a market where no "elite segment" exists. A) Penetration B) Skimming C) Discount D) Sliding-down-the-demand-curve 8) The basic objective of a penetration pricing policy is to: A) recover start-up costs as quickly as possible. B) transform the small firm into a discount outlet. C) Gain quick access into a market to realize high sales volume quickly. D) discourage competition and gradually become a high-volume producer. 9) A new product ________ pricing strategy is often used in markets with little competition and when the company seeks to recover start-up costs quickly. A) penetration B) Skimming C) discount D) sliding-down-the-demand-curve 10) When using a skimming price strategy, small business owners should remember that: A) it is difficult to correct pricing mistakes with this strategy. B) it is a long-term policy and it will take time to see appropriate results. C) if a price is set too low initially, it can be very hard to raise it later. D) It is an excellent strategy for discouraging competitors from entering the market. 11) The ________ pricing strategy often reinforces the unique, prestigious image of a company. A) penetration B) introductory C) discount D) Skimming 12) A ________ strategy works well when a company has a mature product, loyal customers, a reputation for quality, and few competitors. A) penetration B) Skimming C) discount D) price lining 32 13) The Omega Company introduces products with a higher-than-normal price in an effort to quickly recover the initial developmental and promotional costs of the product. The Omega Company is pursuing a ________ pricing strategy. A) fixed-price B) Skimming C) penetration D) loss leader 14) When a retailer routinely prices goods at $9.97 and $7.36 rather than $10.00 and $7.50, the retailer is using: A) variable pricing. B) penetration pricing. C) Odd pricing. D) price skimming. 15) ________ is a technique which greatly simplifies the pricing function by setting the same price for items with similar characteristics. A) Odd pricing B) Leader pricing C) Price lining D) Geographical pricing 16) When a small business practices price lining, it most commonly carries lined merchandise in sets of ________ different ranges. A) 2 B) 3 C) 4 D) 5 17) Jerry is developing a pricing strategy for an established line of home care products. His premium products are priced over $4000, his best products are in the $2540 range, and his good products are $1015 range. Jerry is using a ________ strategy. A) penetration pricing B) leader pricing C) Price lining D) geographic pricing 18) ________ is a technique in which a small firm marks down the price of a popular item below its normal price in an effort to increase customer traffic and to boost sales of other items. A) Odd pricing B) Leader pricing 33 C) Price lining D) Suggested retail pricing 19) In ________ pricing, a type of geographical pricing, a small firm charges customers located in different territories different prices for the same products. A) FOB factory B) uniform delivered C) Zone D) price lining 20) Geographical pricing includes numerous techniques, such as: A) Uniform delivered pricing. B) loss-leader pricing. C) markdowns. D) multiple pricing. 21) ________ is a pricing strategy under which local customers "subsidize" the shipping charges the firm incurs when transporting merchandise to distant customers. A) FOB factory pricing B) Uniform delivered pricing C) Zone pricing D) Opportunistic pricing 22) Many small business owners use a ________ strategy to move stale, damaged, or slow-moving goods or to encourage shoppers to purchase merchandise before an upcoming season. A) multiple pricing B) opportunistic pricing C) Discount pricing D) price lining 23) The Pastry Shop normally sells cheese Danishes for 60 cents each. On Mondays and Tuesdays, its slowest days, The Pastry Shop offers cheese Danishes at "4 for $2.00." This is: A) price lining. B) leader pricing. C) Multiple unit pricing. D) odd pricing. 24) Baseball cards usually sell for 10 cents each. The Card Shop advertises them at "12 for $1.00." This is: A) price lining. B) leader pricing. C) odd pricing. 34 D) Multiple unit pricing. 25) When a computer manufacturer offers its computer with software pre-installed, a printer, and Internet service, as all part of one price, the manufacturer is using a: A) Bundling strategy. B) multiple pricing strategy. C) suggested retail price strategy. D) skimming pricing strategy. 26) When a small business owner doesn't want to make a pricing decision, he/she can use a(n) ________ pricing strategy. A) price lining B) Suggested retail C) opportunistic D) multiple unit 27) Probably the most important consideration a manufacturer has when setting the final price of its new exclusive perfume is: A) the perfume's production cost. B) competitor's prices. C) The image the company wants to create for the scent in the customer's mind. D) choosing between odd pricing and price lining. 28) Dotty has her competitors' price information. Her most effective use of that information would be to: A) seek to match her competitors. B) undercut competitors' prices. C) create a premium image by setting her prices higher than competitors. D) Use it as one variable in her pricing mix. 29) When considering the competition in price setting, the small business owner should: A) consider the competitors' location. B) consider the competitors' motives for their prices. C) consider the nature of the goods being sold. D) Consider all of these. 30) Which of the following factors is vital to determining the effects of competition on the small firm's pricing policies? A) The competitor's location B) The availability of capital for production C) The form of ownership of the small business D) The type of outlet the business is 35 31) When a small business is faced with price competition from a much larger competitor, it should consider: A) going head-to-head on prices by lowering its cost structure. B) Using non-price competition by offering value added service. C) make rapid, continual price changes to keep the competition off balance. D) move to a premium price strategy by offering higher scale goods and services. 32) If a haberdasher purchases a tie for $12 and plans to sell it for $18, the percentage of retail price markup would be: A) 33%. B) 50%. C) 175%. D) 100%. 33) ________ is the average markup required on all merchandise to cover the cost of items, incidental expenses, and a profit. A) Initial markup B) Cost plus markup C) Direct markup D) Contributing margin 34) If an item costs a small business owner $15, and the desired markup on it is 60%, its retail price would be: A) $24.00. B) $25.00. C) $37.50. D) $43.25. 35) A common "me-too" pricing policy by which the small business owner establishes his/her prices by monitoring competitor's prices and then matching them is called: A) Follow-the-leader pricing. B) below-market C) pricing. price D) lining. Variable 36) The most commonly used pricing technique for manufacturers is: A) direct pricing. B) margin pricing. C) Cost-plus. D) absorption pricing. 36 37) Absorption costing: A) is complete pricing in that it takes into consideration all manufacturing and overhead costs. B) guarantees the manufacturer a desired profit margin. C) does not encourage a manufacturer to operate efficiently. D) Clouds the true relationship of price, volume, and costs. 38) Cost-plus pricing has several disadvantages, including: A) it clouds the relationships among price, volume, and costs. B) It fails to consider the competition sufficiently. C) a mentality of "I-can-do-it-cheaper," leading to price competition with larger companies. D) it tends to be reactive rather than proactive in relation to competition and market forces. 39) A reliable cost accounting system is necessary for accurate pricing. The traditional method of product costing, where the costs of direct materials, direct labor, and factory overhead are included, is called ________ costing. A) Absorption B) break-even C) direct D) variable 40) ________ include(s) the unit cost of a manufacturer's product under an absorption costing system. A) Opportunity costs B) Depreciation C) Insurance D) Variable costs 41) ________ costing includes only those costs that vary directly with the volume of an item produced. A) Absorption Break-even B) Indirect C) Direct 42) ________ tells what portion of the total revenues remains after covering variable costs to contribute toward meeting fixed expenses and earning a profit. A) The full-absorption statement B) The break-even selling prices C) The contribution percentage D) Cost-plus pricing 43) Even in the short run, a small business must set the price of a product at least equal to the ________ costs (per unit), or it must shut down. A) fixed 37 B) Variable C) total D) invariable 44) Most service firms base their prices on: A) fairly stable pricing policies. B) the cost of the service plus an estimate of the value they add in delivering the service. C) market surveys on their respective industries. D) An hourly basis for services rendered. 45) To establish a reasonable, profitable price for service, the small business owner needs to know: A) fixed and variable costs, the break-even point, and his/her contribution percentage. B) competitors' prices, and costs of direct and indirect labor. C) The cost of materials, direct labor, and overhead for each unit of service. D) full-absorption costs, direct and indirect labor, and the break-even point. 46) A customer who purchases a television from Ace Appliance Store and pays for it in 36 monthly payments is using: A) trade credit. B) charge account credit. C) Installment credit. D) debit card credit. 47) A firm sells small-ticket items to their regular customers on customer charge accounts and then bills the customers each month. This type of credit arrangement is called: A) Trade credit. B) charge account credit. C) installment credit. D) debit card credit. 48) A variation of geographic pricing in which the small company sells its merchandise to customers on the condition that they pay all the shipping is called: A) uniform delivered pricing. B) F.O.B. factory. C) zone pricing. D) discounts. 49) F.O.B. factory is a variation of ________ pricing. A) opportunistic B) bundling C) Geographic 38 D) skimming 50) When developing a marketing approach to pricing, business owners must: A) Establish prices that are compatible with their customers' expectations and what they are willing to pay. B) compete solely on price. C) establish prices that are compatible with their customers' expectations and add a certain percentage to it. D) establish prices that are compatible with their customers' expectations and subtract a certain percentage to it. 51) Price wars usually begin when: A) the economy is in turmoil. B) when there are more than 4 competitors. C) When one competitor believes that they can achieve a higher volume through lower price. D) small businesses enter the market dominated by bigger giants. 52) Customers that sell small-ticket items frequently offer their customers: A) discounts. B) installment credit option. C) "store value" cards. D) Trade credit. 53) The price that business owners set depends on the desired image they want to create for their products or services. These images are: A) discount. B) value. C) upscale. D) All of the above 54) Brenda is starting her business by offering exclusive hand-bags. The desired image that she should set for her handbags is "exclusive." She should set the price at: A) discount. B) bargain. C) value. D) Upscale. 55) In most cases, a ________ pricing strategy is used to introduce relatively low-priced goods into the market where no elite segment and little opportunity for differentiation exist. A) skimming B) Penetration C) geographic 39 D) opportunistic 56) Uniform delivered pricing is a variation of: A) opportunistic pricing. B) leader pricing. C) Geographic pricing. D) multiple pricing. 57) Which price strategy is mostly used for moving stale, outdated, damaged merchandise? A) Markdown pricing B) Multiple pricing C) Bundling D) Skimming 58) XYZ manufactures computer hardware. The marketing executives, in order to increase the market share, forced a business to accept a suggested retail price and not to sell the items below the stated price. A) This practice violates the Sherman Antitrust Act. B) There is no violation. According to a recent Supreme Court decision, this is fine. C) This practice violates the Fair Price Protection Act. D) As long as the manufacturer offers rebates, they can do whatever they want. 59) For some customers, a higher price equal: A) higher quality. B) greater perceived value. C) uniqueness. D) All of the above 60) Price ________ usually begin(s) when one competitor believes that they can achieve a higher volume through lower price, or they believe that they can exert enough pressure on other competitors' profits to drive them out of business. A) discounts B) markdowns C) Wars D) penetration 61) The problem with using ________ is that it clouds the true relationships among price, volume, and costs by including fixed expenses in unit cost. A) Full-absorption costing B) variable costing C) contribution margin costing 40 D) break-even costing 62) Which of the following is correct? A) Sales – variable costs – fixed costs = contribution margin B) Total revenue – variable costs = contribution margin C) Total revenue – fixed costs = contribution margin D) Total revenue – profit = contribution margin 63) Which of the following is a fair definition of price? A) In purely economic terms, price is the monetary value of a good or service. B) Price is a measure of what a customer is required to give up to obtain a good or service. C) None of the above D) Both A and B 64) The price floor is established: A) By the firm's total cost. B) by the consumers. C) by the government. D) None of the above 65) Businesses faced with rapidly rising raw materials costs should consider the following strategies: A) Communicate with customers and focus on improving efficiency everywhere in the company. B) Emphasize the value your company provides to customers. C) Anticipate rising materials costs and try to lock in prices early. D) All of the above 66) Most often, small business owners ________ their goods and services, believing that ________ prices are the only way they can achieve a competitive advantage. A) over price; high B) under price; low C) over price; low D) under price; high 67) Two factors are vital to studying the effects of competition on a small firm's pricing policies: A) the location of the competitors and the nature of the competing goods. B) the pricing. C) the location of the competitors and their marketing efforts. D) Both A and B 68) Three objectives of new product pricing are: A) Get the product accepted, maintain market share as competition grows, and earn a profit. B) get the product accepted, avoid price wars, and earn a profit. 41 C) maintain market share as competition grows, earn profits, and increase sales. D) D) None of the above 69) Judith started her business in 1995. During the years, she sold different products she purchased from distributors and manufacturers. One day, she came up with a new product. She patented the product and got started to sell the product. What should be the objectives of her pricing strategies? A) Get the product accepted B) Maintain market share as competition grows C) Earn a profit D) All of the above 70) A ________ pricing strategy often is used when a company introduces a new product into a market with little or no competition. A) price war B) competitive C) Skimming D) price floor 71) As sales volume increases with the broad acceptance of the new products, the firm can lower its price. This is a characteristic of: A) price wars. B) competitive pricing. C) Skimming. D) penetration. 72) Small businesses whose pricing decisions are greatly affected by the costs of shipping merchandise to customers across a wide range of geographic regions frequently employ one of the ________ techniques. A) opportunistic pricing B) Geographic pricing C) leader pricing D) price lining 73) ________ is grouping together several products or services, or both, into a package that offers customers extra value at a special price. A) Leader pricing B) Price lining C) Discount pricing D) Bundling 74) ________ pricing is when the base product is not functional without the appropriate accessory. A) Captive product B) Optional product 42 C) By-product D) None of the above. 43 Chapter 13 E-Commerce and Entrepreneurship 1) ________ is a trend where people test products in retail stores but buy them online. A) Showboating B) Commoditizing C) Onlining D) Showrooming 2) The items purchased most often online are: A) apparel. B) computer hardware. C) books. D) All of the above 3) Globally, people spend ________ billion hours online per month. A) 35 B) 25 C) 15 D) 5 4) One of the Internet's greatest strengths is its ________ nature. A) efficiency B) collectivistic C) interactive D) atavistic 5) Perhaps the most visible impact of the Internet is in the world of ________. A) services B) manufacturing C) education D) retailing 6) For many entrepreneurs, the barrier for launching e-commerce is: A) where and how to start an e-commerce effort. B) lack of funding. C) lack of IT staff. D) Both B and C 7) Before launching an e-commerce, the business owner should consider: A) handling of customer service for the site. 44 B) the impact of the Web site on the company's traditional channels of distribution. C) Both A and B D) Neither A nor B 8) One of the myths of e-commerce is that: A) setting up a business on the Web is easy. B) setting up a business on the Web is inexpensive. C) setting up a business on the Web is impossible. D) Both A and B 9) After launching the Web site, the companies must follow-up by: A) redesigning the Web site and buying more hardware to support the Web site. B) automating or expanding the warehouse to meet customer demand. C) integrating the Web site into the inventory control system. D) All of the above 10) The key to promoting a Web site is networking, building relationships with other companies, customers, trade associations, ________, and other Web sites your company's customers visit. A) on-line directories B) E-mail access C) shopping carts D) All of the above 11) Before your Web site can become the foundation for a successful e-business, you must create it with your ________ in mind. A) technology B) employees C) Target audience D) vendors 12) The most common reasons for leaving a site without purchasing include: A) the shopping cart was easy to find. B) checking out was easy and quick. C) the site was trustworthy. D) Shipping charges were too high. 13) Perhaps the most significant actions on-line companies can take to bolster their customer service efforts are: A) providing a quick online checkout process. B) creating a well-staffed and well-trained customer response team. C) offering a simple return process. 45 D) All of the above 14) Sites that ________ may never have the chance to sell because customers will click to another site. A) move quickly B) Download slowly C) don't have e-mail D) don't have toll-free numbers 15) E-Commerce requires a basic infrastructure somewhere in the channel of distribution to process orders, maintain inventory, ________, and handle customer service. A) Fill orders B) process e-mail C) technology D) All of the above 16) ________ suits many e-tailers perfectly. A) Drop-shipping B) Virtual shipping C) Customer shipping D) Group shipping 17) The typical Internet user in the United States spends an average of ________ hours a month online. A) 33 B) 125 C) 52 D) 104 18) What are the guidelines for building a successful Web strategy for a small ecompany? A) Fill a niche B) Have a lot of products on sale C) Have advanced technology D) Bring advertising revenue by selling banners 19) A niche can be defined in many ways, including: A) by geography. B) by customer profile. C) by product. D) All of the above 20) KHA.com started selling sporting goods designed for senior citizens who live in retirement homes and apartments. KHA.com is selling its products using a: 46 A) Niche strategy. B) community strategy. C) mass strategy. D) senior citizens strategy. 21) E-mail lists and ________ are powerful tools for building a community of visitors at a site. A) toll-free numbers B) discussion boards C) Chat rooms D) broadcast advertising 22) To increase customer confidence and credibility, join programs such as: A) Don and Brad Street. B) TRUSTe. C) BBBOnLine. D) Both B and C 23) Recommended techniques for having a killer Web site are: A) Avoiding clutter. B) continuous sound play. C) not to change the Web site. D) All of the above 24) ________ is a tool that measures a Web site's ability to attract customers, generate sales, and keep customers coming back, help entrepreneurs know what works—and what doesn't—on the Web. A) A counter B) Web analytics C) A Web designer D) A server application 25) Which one of the following is not a basic Web analytic? A) Time spent on site B) Sales revenue generated C) Number of items sold D) Which products are selling best (and which are not) 26) The ________ is the cost a company incurs to generate each purchase. A) CTA B) CPA C) CSA 47 D) CMA 27) The ________ is the proportion of people who see a company's online ad and actually click on it to reach the company's Web site. A) AVPV B) CPA C) CTR D) None of the above 28) Another word for browse-to-buy is: A) conversion. B) controller. C) tracker. D) browse-to-purchase. 29) The browse-to-buy rate is also called the ________ rate. A) click-through B) browsing C) conversion D) banner 30) In Web analytics, CPA is the acronym for: A) customers per acquisition. B) cost per account. C) customers per account. D) cost per acquisition. 31) Conversion rates range from: A) 8-10 percent. B) 2-6 percent. C) ten plus percent. D) 1-4 percent 32) The average conversion rate is: A) 10 percent. B) 3.2 percent. C) less than 1 percent. D) 5.8 percent. 33) Each time an ad is displayed is called a(n): A) clustering. 48 B) filtering. C) impression. D) loading. 34) A(n) ________ is a statement explaining the nature of the information a company collects online, what it does with that information, and the recourse customers have if they believe the company is misusing the information. A) employment manual B) online manual C) privacy policy D) online policy 35) What software scans computer drives for viruses and nasty programs? A) Virus detection B) Firewall C) Server application D) Detention software 36) What software is essential for any company doing business on the Web to constantly monitor the activity on a company's network server and sound an alert if it detects someone breaking into the company's computer system? A) Firewall B) Alarm detention program C) Intrusion detection software D) Artificial intelligence 37) Which technology encrypts the customer's data as the information travels across the Internet? A) Firewall B) Secure Socket Layer C) Virus protection D) None of the above 38) What is CVV or CVV2? A) Customer tracking technology B) Customer verification value C) Credit verification value D) Card verification value 39) Reasons for leaving a Web site without purchasing are: A) having a phone number when encountering problems. B) insufficient product information. 49 C) having to check back to view items in the shopping cart. D) for security purposes, multiple steps are necessary to get to the checkout page. 40) Which of the following is correct? A) Make it easy for customers to change the contents of their shopping carts. B) Give customers the option of calling to resolve problems they encounter during checkout. C) Make it easy for customers to pay for their online purchases. D) All of the above 41) Which of the following is correct? A) Although fancy graphics, bright colors, playful music, and spinning icons can attract attention, they also can be quite distracting and very slow to download. B) Sites that download slowly may never have the chance to sell because customers will click to another site. C) None of the above D) Both A and B 42) The Web offers shoppers the ultimate in: A) convenience. B) quality. C) differentiation. D) service. 43) The other name for virtual order fulfillment is: A) drop-shipping. B) instant shipping. C) convenience shipping. D) group shipping. 44) Most common mistakes that entrepreneurs make once they finally decide to go online are: A) they believe they have to have a "perfect" site before they can launch it. B) few businesses get their sites "right" the first time. C) in fact, the most successful e-commerce sites are constantly changing, removing what does not work and adding new features to see what does. D) D) All of the above 45) Developing a community refers to: A) attracting customers and keeping them coming back. B) giving customers the chance to interact with other like-minded visitors. C) providing chat rooms. D) All of the above 50 46) ________ listings are short text advertisements with links to the sponsoring company's Web site that appear on the results pages of a search engine when a user types in a keyword or phrase. A) Drop B) Virtual C) Negotiated D) Paid 47) Which of the following statements is true for improving a company's search placement results? A) Visit competitors' sites for key word ideas but avoid using the exact phrases. B) Consider using less obvious key words and brand names. C) Ask customers which words and phrases they use when searching for the products and services the company sells. D) All of the above 48) Paid listings also are called: A) pay for placement. B) pay per click. C) pay for performance ads. D) All of the above 49) The ideal domain name should be: A) short & memorable. B) indicative of a company's business or business name. C) easy to spell. D) All of the above 51 Chapter 14 Creating a Solid Financial Plan 1) A pro forma financial statement means: A) looking at the current financial statement. B) looking at the past financial statement. C) preparing the current financial statement. D) preparing a projected financial statement. 2) The ________ shows what assets the business owns and what claims creditors and owners have against those assets. A) balance sheet B) income statement C) sources and uses of funds statement D) pro forma 3) The ________ is built on the basic accounting equation: Assets = Liabilities + Owner's Equity. A) income statement B) sources and uses of funds statement C) Balance Sheet D) cash budget 4) The balance sheet is usually prepared on the ________ day of the month. A) first B) Last C) 15th D) None of the above 5) John is reviewing the company's costs and expenses against revenue for the last year. John is reviewing the firm's: A) balance sheet. B) Income statement. C) sources and uses of funds statement. D) pro forma. 6) The first section of a balance sheet lists: A) Current and intangible assets. B) current liabilities. C) claims creditors have against the firm's assets payable within one year. D) the owner's equity in terms of initial capital invested and retained earnings. 7) ________ are those items of value the business owns; ________ are those things the business owes. 52 A) Assets; liabilities B) Liabilities; assets C) Ratios; equities D) Equities; liabilities 8) Bill is studying those expenses that contribute directly to manufacturing and distribution of goods. He's reviewing: A) cost of goods. B) general expenses. C) Operating expenses. D) current liabilities. 9) The profit and loss statement is also referred as the ________. A) balance sheet B) statement of cash flows C) revenue statement D) Income statement 10) Dividing gross profit by net sales produces: A) operating expenses. B) Gross Profit Margin. C) long-term profitability. D) gross profit flow. 11) The statement of cash flow: A) compares costs and expenses against a firm's sales. B) is built on the basic accounting equation: Assets = Liabilities + Capital. C) shows what assets the business owns and what claims creditors and owners have against those assets. D) Shows changes in working capital by listing sources and uses of funds. 12) The ________ shows the change in the firm's working capital since the beginning of the year. A) balance sheet B) income statement C) pro forma D) Statement of cash flows 13) Depreciation is: A) the difference between the total sources available to the owner and the total uses of those assets. B) Listed as a source of funds because it is a noncash expense, deducted as a cost of doing business. C) the owner's total investment at the company's inception plus retained earnings. D) creditors' total claims against the firm's assets. 53 14) Projecting financial statements helps the small business owner to: A) track and monitor current expenses. B) Transform business goals into reality. C) calculate his/her return on the amount invested in the company. D) measure liquidity of the firm. 15) One of the most important tasks facing an entrepreneur is: A) establishing a large enough reserve of capital. B) earning enough the first year to provide an adequate return on investment. C) the deferment of taxes. D) Determining the funds needed for a company start-up. 16) When creating the pro forma income statement, the owner needs to translate the target profit into a net sales figure. To do this, the owner needs: A) to operate the business for one to two years to build a record. B) Published statistics for his/her specific type of business. C) to divide actual net sales by the net profit projected. D) a sales forecast, the amount of retained earnings, and current depreciation on assets. 17) The first step in creating the pro forma income statement is to: A) Create a sales forecast. B) determine a reasonable salary and return on investment in the company. C) find published figures on the specific type of business in order to forecast sales. D) figure out operating costs and make a realistic sales estimate. 18) ________ are those things that a business owns which have value. A) Assets B) Liabilities C) Owners' equities D) Liquidities 19) ________ are those things that a business owes; they represent creditors' claims against the business. A) Assets B) Liabilities C) Owners' equities D) Liquidities 20) A technique that allows the small business owner to perform financial analysis by understanding the relationship between two accounting elements is called: A) creating the pro forma. 54 B) budgeting. C) break-even analysis. D) Ratio analysis. 21) What are the options for repairing a poor gross profit margin? A) Raise prices B) Cut manufacturing or purchasing costs C) Refuse orders with low profit margins D) All of the above 22) ________ ratios tell whether or not the small company will be able to meet its maturing obligations as they come due. A) Leverage B) Profitability C) Liquidity D) Operating 23) The ________ ratio is a measure of the small company's ability to pay current debts from current assets. A) debt-to-net worth B) Current C) quick D) debt-to-assets 24) The ________ ratio is the liquidity ratio most commonly used as a measure of shortterm solvency. A) Working capital ratio B) quick C) debt-to-net worth D) turnover 25) As a general rule, financial analysts suggest that a small business maintain a(n) ________ ratio of at least 2:1. A) debt-to-net worth B) Current C) inventory turnover D) quick 26) When a company is forced into liquidation, owners are most likely to incur a loss when selling: A) accounts receivable. B) Inventory. C) marketable securities. 55 D) real estate. 27) The ________ ratio is a conservative measure of a firm's liquidity and shows the extent to which a firm's most liquid assets cover its current liabilities. A) current B) Quick C) turnover D) net profit 28) ________ ratios measure the financing supplied by business owners and that supplied by the firm's creditors. A) Leverage B) Profitability C) Liquidity D) Operating 29) Joe is examining the percentage of total funds in a business provided by its creditors. He is working with the ________ ratio. A) current B) quick C) Debt D) turnover 30) A high debt ratio: A) Means that creditors provide a large percentage of the company's total financing. B) gives a small business more borrowing capacity. C) decreases the chances that creditors will lose money if the business is liquidated. D) decreases the creditor's interest in the business. 31) ________ is one indication that a small business may be undercapitalized. A) A current ratio below 1:1 B) A quick ratio above 2:1 C) A debt-to-net worth ratio above 1:1 D) A net-sales-to-working capital ratio equal to 3:1 32) If Mary wants to compare what her small business owes to what it owns in order to assess her ability to meet obligations in case of liquidation, she needs to look at the ________ ratio. A) quick B) total debt turnover C) asset turnover D) Debt-to-net worth 56 33) The higher the ________ ratio, the lower the degree of protection afforded creditors and the closer creditors' interest approaches the owner's interest. A) Debt-to-net worth B) quick C) asset turnover D) current 34) The ________ ratio is a measure of a company's ability to make the interest payments on its debt. A) debt-to-net worth B) Times-interest-earned C) net sales-to-working capital D) net profit-to-equity 35) Which of the following would be a sign that a company is overextended in its debt? A) A low debt ratio compared to the industry average B) A debt-to-net worth ratio of 0.12 to 1 C) A times-interest-earned ratio that is far below the industry average D) A high inventory turnover ratio 36) ________ ratios help a business owner evaluate the company's performance and indicate how effectively the business employs its resources. A) Liquidity B) Leverage C) Operating D) Profitability 37) An above-average inventory turnover indicates that the business: A) has an illiquid inventory. B) Is healthy, with a salable inventory. C) needs to review its pricing policies. D) has below-average performance and is facing bankruptcy if not corrected quickly. 38) The ________ ratio measures the small company's ability to generate sales in relation to its assets. A) net sales-to-working capital B) Net sales-to-total assets C) average collection period D) average inventory turnover 39) ________ ratios indicate how efficiently the small firm is being managed. A) Liquidity 57 B) Profitability C) Leverage D) Operating 40) The ________ ratio measures the owner's rate of return on the investment in the business. A) Net profit-to-equity B) net profit on sales C) quick profit D) net sales-to-working capital 41) ________ publishes key business ratios for over 800 business categories. A) Robert Morris Associates B) Boston Consulting Group C) Bank of America D) Dun and Bradstreet, Inc. 42) ________ publishes Annual Statement Studies, showing ratios and other financial data for over 750 different industrial, retail, and wholesale categories. A) Robert Morris Associates B) Boston Consulting Group C) Bank of America D) Dun and Bradstreet, Inc. 43) The break-even point occurs where: A) the firm's fixed expenses equal its variable expenses. B) the creditors' interest equals the owner's interest in the business. C) Total revenue equals total expenses. D) assets and liabilities are equal on the balance sheet. 44) Which of the following expenses would likely be classified "semi-variable"? A) Rent B) Electric utilities C) Wages D) Sales commissions 45) Which of the following expenses would be considered "fixed"? A) Wages B) Raw materials C) Utilities D) Rent 58 46) The rule for the balance sheet is: A) Assets = Liabilities + Owner's Equity B) Assets - Liabilities = Owner's Equity C) Liabilities = Assets - Owner's Equity D) All of the above 47) In the balance sheet, the current assets consist of: A) accounts payable. B) Inventory. C) revenue. D) All of the above 48) In the balance sheet, intangible assets include items such as: A) goodwill. B) copyrights and patents. C) Both A and B D) accounts receivable. 49) ________ is (are) the value of the owner's investment in the business. A) Assets B) Liabilities C) Owner's Equity D) Profit 50) Investors mainly want to see that entrepreneur: A) have inflated the projections. B) Have realistic expectations about income and expenses. C) will make profit immediately. D) All of the above 51) The most meaningful basis for comparing operating ratios is: A) Other companies of similar size in the same industry. B) companies within the neighborhood. C) major corporations in the same industry. D) all publicly traded companies. 52) A ratio greater than ________ days would indicate poor collection procedures. A) 29 B) 40 C) 60 D) 90 59 53) When comparing a company's ratios to industry standards, entrepreneurs should ask questions such as: A) Are the differences significant? B) Do I need to conduct ratio analysis? C) How do these ratios benefit me? D) All of the above 54) Evaluates the firm's overall performance and show how effectively it is putting its resources to work. This is called: A) operating ratios. B) debt to equity ratio. C) accounts receivable turnover ratio. D) All of the above 55) ________ measure how efficiently the firm is operating and offer information about its bottom line. A) Operating ratios B) Profitability ratios C) Balance Sheet ratios D) All of the above 56) ________ measure the financing supplied by the company's owners against that supplied by its creditors and serve as a gauge of the depth of a company's debt. A) Operating ratios B) Profitability ratios C) Leverage ratios D) Liquidity ratios 57) ________ tell whether or not the small business will be able to meet its maturing obligations as they come due. A) Operating ratios B) Profitability ratios C) Leverage ratios D) Liquidity ratios 58) In reviewing the company's balance sheet, Andy noticed that the total asset is stated as $5,500,000 and the total liability is $3,250,000. There is no paid-in capital or value for common stock. What are the company's retained earnings? A) Can't determine with the information given B) $8,750,000 C) $2,250,000 60 D) There are no retained earnings 59) When comparing a company's ratios to industry standards, entrepreneurs should ask the which of the following questions: A) Is there a significant difference in my company's ratio and the industry average? B) Is the difference good or bad? C) What are the possible causes of this difference? What is the most likely cause? D) D) All of the above 60) What is the difference between price per unit and variable cost per unit? A) Contribution margin B) Contribution margin ratio C) Net operating income D) Contribution cost 61) Which of the following is correct? A) Assets – Liabilities = Equity B) Assets – Equity = Liabilities C) Assets = Liabilities + Equity D) All of the above 62) In which statement are the account balances reversed to zero on a monthly basis? A) Balance sheet B) Cash flow statement C) Income statement D) All of the above 61 Chapter 15 Managing Cash Flow 1) The first step in managing cash more effectively is: A) having an adequate cash reserve for emergency expenditures. B) rapid payment of accounts payable. C) speeding up payment of accounts receivable. D) Understanding the company's cash flow cycle. 2) ________ is the money that moves through the business in a continuous cycle. A) Profit B) Net income C) Cash D) Cash flow 3) ________ companies are most likely to suffer cash shortages. A) Slow-growth B) Service C) Manufacturing D) Fast-growth 4) Bill and Henry are discussing the volume of cash that has been coming into and going out of their business during the accounting period. They are discussing: A) profit. B) net income. C) accounts receivable and payable. D) Cash flow. 5) ________ typically lead(s) sales; ________ typically lag(s) sales. A) Production; receivables B) Collections; purchases C) Receipts; production D) Purchases; collections 6) ________ is simply a "cash map" which shows the amount and the timing of cash receipts and cash disbursements over time. A) The income statement B) A balance sheet C) A cash budget D) The pro forma 62 7) When creating the cash budget, keep in mind that: A) it should be a monthly plan, projected out for 3 years. B) The more variable the sales pattern, the shorter the planning horizon should be. C) it should be quarterly estimates for a period of 1 year. D) it is a verbal or mental "document" in order to permit maximum flexibility. 8) The cash budget is based on the ________ method of accounting. A) Cash B) financial C) accrual D) hybrid 9) Which of the following items appear on a cash budget? A) Depreciation B) Bad debt expenses C) Noncash items not involving cash transfers D) Cash receipts and disbursements 10) Once the owner determines an adequate minimum cash balance, what is the next step in creating a cash budget? A) Forecasting profits B) Forecasting sales C) Forecasting cash receipts D) Forecasting cash disbursements 11) Jane is arguing with Joan about how much cash on hand their small retail outlet needs as they prepare their cash budget. Jane feels that with the Christmas season coming up, their busiest time, they need more cash handy. Joan feels they don't because their sales volume will be up significantly. Jane and Joan are discussing which step of the cash budgeting process? A) Determining an adequate minimum cash balance B) Forecasting sales C) Forecasting cash receipts D) Forecasting cash disbursements 12) The heart of the cash budget is the ________ forecast. A) Cash receipts B) cash disbursements C) Sales D) receivables 63 13) A cash budget is only as accurate as the ________ forecast from which it is derived. A) profit B) receivables C) income D) Sales 14) Which of the following would be a potential source of information for a sales forecast? A) Past records B) Trade associations and the Chamber of Commerce C) Similar firms D) All of these 15) When a firm sells goods or services on credit, the owner needs to remember that for cash budgeting purposes: A) the sale may be immediately posted as if it has been collected. B) the sale should be recorded in the month it was made. C) He/she must account for a delay between the sale and collection of proceeds. D) such a transaction counts as a cash disbursement. 16) When forecasting cash disbursements in the cash budget: A) they count as a cash receipt until they are paid. B) They should be recorded in the month they will be paid. C) the disbursement should be recorded in the month the obligation was incurred. D) the money can be used for other purposes until it is due for disbursement. 17) Generally speaking, most small business owners tend to: A) overestimate cash disbursements. B) underestimate cash receipts. C) Underestimate cash disbursements. D) try to count unpaid cash disbursements as cash that can be spent. 18) When estimating the firm's end-of-month cash balance the owner should first: A) Determine the cash balance at the beginning of the month. B) add up total cash receipts and subtract cash on hand. C) review the accounts receivable. D) make a daily list of cash disbursements. 19) The "big three" of cash management include: A) accounts receivable, overhead, and inventory. B) accounts payable, accounts receivable, and taxes. C) Accounts receivable, accounts payable, and inventory. 64 D) accounts receivable, prices, and expenses. 20) ________ is simply the money owed the firm by customers because they've purchased goods or services on credit. A) Accounts receivable B) Accounts payable C) Barter D) Cash management 21) The most important item on the balance sheet is: A) Cash. B) disbursements. C) expenses. D) receivables. 22) Small businesses selling on credit find that: A) it is relatively inexpensive and simple. B) It is expensive and requires a great deal of effort. C) it is essentially borrowing money from the customer. D) many can get by without selling on credit because their business customers don't expect to use credit. 23) The annual losses in bad debts for small businesses is: A) $856 million. B) $12 billion. C) $42 billion. D) $312 million. 24) The first step to building a workable credit policy is: A) Screening customers carefully before granting them credit. B) establishing a firm credit policy in writing. C) developing a policy for pursuing past-due accounts. D) creating a thorough credit application. 25) The first line of defense against bad debt losses is: A) screening customers carefully before granting them credit. B) establishing a firm credit policy in writing. C) developing a policy for pursuing past-due accounts. D) Creating a thorough credit application. 26) Which of the following are credit reporting services a small business owner could use to check a customer's credit? 65 A) National Association of Credit Management B) TRW C) Dun & Bradstreet D) All of these 27) An important source of credit information that collects information on small businesses that other reporting services ignore is: A) National Association of Cre

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