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1. Business 100 Test 2 Review
Q5-1.The __________________ is usually the easiest form of business to start and end.
A) sole proprietorship B) limited partnership
C) corporation D) cooperative
Ans: A p. 143
Q5-2. Mara plans to open a shop specializing in foods and cultural items from the Middle East. She
wants to be the firm's only general partner, but she is trying to get several friends to participate as
limited partners. Apparently Mara wants to:
A) limit her personal liability to the amount she personally invests in the company.
B) be the only person allowed to share in the firm's profits.
C) obtain a strong financial base for the firm while maintaining personal control over the firm's
management.
D) meet the legal requirements of the Uniform Partnership Act.
Ans C p. 145
Q5-3. Jamie and Maria invested all their savings in a small pizzeria they opened outside the University
of Western Kentucky. They operated the business as a general partnership. After 11 months the
business went broke and Jamie and Maria were left with outstanding bills of $37,500, which is
more than their investment in the company. Jamie and Maria can:
A) lose their personal assets as the result of their company's financial problems.
B) lose only the funds they originally invested in their company.
C) lose only the total value of the assets actually used to operate the business.
D) avoid any liability for these debts since a partnership is considered to be a business entity
that is separate and distinct from the partners who own it.
Ans A p. 146
Q5-4. A separation between ownership and management is most likely to occur in a:
A) sole proprietorship.
B) general partnership.
C) corporation.
D) limited liability partnership.
Ans C p. 150
Q5-5. One reason limited liability companies have become so popular is that they:
A) can be taxed either as a corporation or as a partnership, so owners can choose the tax
treatment that is most advantageous for their situation.
B) allow owners to sell their interests in the company without requiring approval from other
owners.
C) have unlimited life.
D) allow owners to avoid paying self-employment taxes on the company's profits.
Ans A p. 154
Q5-6. In a leveraged buyout, the managers of a firm, its employees, or other investors attempt to:
A) move the company elsewhere and start over.
B) obtain the assets of the company through bankruptcy proceedings.
C) use borrowed funds to buy out the firm's stockholders.
D) negotiate a merger with another firm to create a conglomerate.
Ans C p. 157

2. Q5-7. Trans Globe Airlines has recently looked into a merger with Royal Blue Airlines, a financially
troubled rival. The firms believe the merger will create a stronger company that can offer
travelers more flights to a wider variety of destinations. This proposed merger is an example of a:
A) conglomerate merger.
B) leveraged buyout.
C) horizontal merger.
D) joint venture.
Ans C p. 157
Q5-8. An evaluation of franchising would conclude that this type of arrangement:
A) has become the dominant form of business organization in the United States because it has
many advantages and almost no disadvantages.
B) appeals to people who want to own a business, but are not comfortable starting a company
from scratch.
C) has a much higher risk of failure than independent companies.
D) has little chance of success outside the United States because many foreign countries do not
allow such arrangements.
Ans B p. 158
Q5-9. Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name
and offer Midas products. In a franchise arrangement, Midas would be the_____________, and
the buyer of the franchise is the ____________.
A) owner; limited partner.
B) co-signer; co-signee.
C) franchisor; franchisee.
D) wholesaler; retailer.
Ans C p. 158
Q5-10. A ___________ is an organization that is owned and controlled by the people who use it—
producers, consumers and workers with similar needs who pool their resources for mutual gain.
A) corporation.
B) limited partnership.
C) mutual fund.
D) cooperative.
Answer: D Page: 165
Q6-1.An entrepreneur:
A) manages a business for someone else.
B) owns controlling interest in the stock of a major corporation.
C) manages a business that operates in more than one country.
D) accepts the risk of starting and running a business.
Ans D p. 174
Q6-2. One way an intrapreneur differs from an entrepreneur is that:
A) intrapreneurs start nonprofit organizations while entrepreneurs start profit-seeking
businesses.
B) intrapreneurs are practical while entrepreneurs are creative.
C) intrapreneurs work within existing corporations while entrepreneurs assume the risks of
starting their own business.
D) intrapreneurs limit their efforts to financial investments, while entrepreneurs are involved in

3. all areas of business activity.
Ans C p. 181
Q6-3. When looking at the advantages and disadvantages of starting various types of businesses, it
appears that:
A) businesses that are easy to start often offer the greatest potential for long term growth and
profits.
B) the greatest security is available in the manufacturing sector.
C) businesses that offer a chance for high profits tend to be difficult to start and hard to keep
going.
D) the reason the service sector is growing so rapidly is that service firms are easy to start, easy
to keep going, and offer both growth opportunities and plenty of security.
Ans C p. 186
Q6-4. Manny is about to graduate from college, and is looking for full time employment. He has
decided to concentrate on looking for a job with a major corporation. His job search strategy:
A) makes sense, because managerial skills can only be fully developed by working for big firms.
B) is smart because major corporations are still the most important source of employment
growth in the United States.
C) indicates that Manny wants a chance to utilize his entrepreneurial talents.
D) is likely to limit his job prospects since most new jobs are with small businesses.
Ans D p. 184
Q6-5. An examination of statistics about people who start their own businesses reveals that:
A) many small business owners got their entrepreneurial idea from a previous job they held.
B) it is rare for managers with experience working within big corporations to start their own
businesses.
C) people who start their own businesses right after graduating from high school or college are
generally more successful than those who first work for someone else.
D) most small business owners have a great deal of personal wealth.
Ans A p. 187
Q6-6. Which of the following suggestions would an experienced entrepreneur most likely give to
someone who is thinking about starting their own business?
A) Starting a new business is always better than buying an existing firm.
B) Even small businesses must keep accurate records.
C) In order to keep costs low when the company is just getting started, wait at least a year before
hiring an accountant or lawyer.
D) Prior business experience is not really important in managing a new firm.
Ans B p. 195
Q6-7. The primary focus in managing a new business should likely be:
A) human relations and accounting.
B) financing and planning.
C) marketing and public relations.
D) staffing and controlling.
Ans B p. 189
Q6-8. When seeking a loan from a bank, an entrepreneur hoping to start a new business should realize
that bankers will:
A) expect to receive a share of ownership in the business in exchange for their loan.

4. B) expect the entrepreneur to have a well prepared business plan.
C) generally make loans only to small businesses in computer related industries.
D) offer only very short-term financing.
Ans B p. 189
Q6-9. Luis is a partner in a firm that specializes in producing vitamins and health food products. While
the business is considered small by U.S. standards, he is attempting to persuade his partner to
expand internationally. Luis would list all of the following as advantages of going international
with the exception of:
A) Exporting can absorb excess inventory.
B) Marketing will encounter cultural similarities in prospective markets.
C) Expanding internationally may lessen the impact of a downturn in the domestic market.
D) Selling your products in other markets may extend their life cycle.
Ans B p. 197
Q6-10. One of the main reasons why many American small businesses are not involved in global
business transactions is:
A) there is only a limited market for their products.
B) the government has been against active participation.
C) many potential exporters do not know how to get started.
D) American products are looked upon as being inferior.
Ans C p. 197
Q7-1.Today's progressive managers:
A) usually prefer to use the autocratic style of leadership.
B) tend to emphasize teamwork and cooperation rather than discipline and order-giving.
C) face fewer challenges and problems than managers in the past.
D) can rely on a much higher level of worker loyalty to the organization than in the past.
Ans B p. 212
Q7-2. Which of the following activities is part of the organizing function of a manager?
A) Going over a spreadsheet to analyze some financial data.
B) Teaching a new employee how to use a piece of office equipment.
C) Giving front-line workers additional resources needed to provide faster and better service to
customers.
D) Developing a broad general strategy to help the organization meet its long-term growth
objectives.
Ans C p. 213
Q7-3. When managers identify a market trend that suggests a new opportunity and then devise a
strategy to go after this new opportunity, they are involved in the function of:
A) controlling. B) planning.
C) leading. D) organizing.
Ans B p. 213
Q7-4. _________ analysis is used to help companies evaluate their economic environments, assess their
strengths and weaknesses, and identify competitive threats and market opportunities.
A) WISH B) SWAMP
C) ASSET D) SWOT
Ans D p. 216
Q7-5. Which of the following techniques would a team of workers be most likely to use if they wanted

5. to evaluate several possible solutions to a specific problem their company needs to solve?
A) PERT. B) Regression analysis.
C) PMI. D) SWOT
Ans C p. 219
Q7-6. Ed Flavorman, the chief executive of Flavor Best Ice Cream, believes that alternative plans are
almost as important as the primary operational plans because the market is so competitive and
unpredictable. Ed endorses:
A) tactical planning. B) retroactive planning.
C) concurrent planning. D) contingency planning.
Ans D p. 218
Q7-7. General and divisional managers, plant managers, and deans and department heads at colleges all
are positions that usually are classified as:
A) middle management. B) supervisory management.
C) top management. D) nominal management.
Ans A p. 220
Q7-8. Which of the following statements about effective leadership is the most accurate?
A) Most effective leaders share certain specific traits.
B) The most effective leadership style depends on who is being led and in what situation.
C) The democratic style of leadership will almost always improve the effectiveness of the
organization.
D) One trait of effective managers is that they consistently maintain the same style of
leadership.
Ans B p. 228
Q7-9. At Livwell Pharmaceuticals, research personnel are told that the company would like to develop
at least three new products each year and are given some general information about which types
of drugs seem to have the most potential. After that, scientists and other research personnel work
essentially on their own to develop the new drugs. Managers at Livwell seem to prefer:
A) free-rein leadership. B) consultative leadership.
C) projectory leadership. D) autocratic leadership.
Ans A p. 227
Q7-10. Ho Han has just spent two hours going over quality reports to determine whether his department
is meeting quality standards he set for the current month. Ho's efforts are part of the ___________
function of management.
A) planning B) organizing
C) directing D) controlling
Ans D p. 231
Q8-1.Economies of scale:
A) are available to small firms but not to large firms due to management inefficiencies.
B) are achieved when a firm reduces its average cost of production as they produce more.
C) can be avoided by purchasing supplies and raw materials in large quantities.
D) help explain the success of small businesses.
Ans B p. 241

6. Q8-2. Mo was just hired by a firm that has a very bureaucratic organization. Mo is likely to encounter
all of the following conditions except:
A) many layers of management.
B) many rules and regulations that employees are expected to follow.
C) a career path that requires employees to change departments on a regular basis.
D) departmentalization by function.
Ans C p. 243
Q8-3. In a(n) _____________ organization, decision-making authority is maintained at the top level of
management.
A) compartmentalized B) standardized.
C) inverted D) centralized
Ans D p. 245
Q8-4. Within its production department, the Marlin Manufacturing has shift leaders, supervisors,
assistant plant managers, plant managers, product group managers, assistant division managers,
division managers, an assistant vice president for production, and a vice president in charge of
production. Marlin Manufacturing is an example of a(n) ____________ organization.
A) tall B) wide
C) cross-functional D) decentralized
Ans A p. 247
Q8-5. Which of the following positions in a firm would be classified as a staff position?
A) an assembly line worker for a major auto manufacturer
B) the chief executive officer of a small corporation
C) a sales manager for a chain of clothing stores
D) a lawyer employed in the legal department of a manufacturing corporation
Ans D p. 251
Q8-6. Groups of employees from different departments who work together on a semi-permanent basis
are members of:
A) focus groups. B) control groups.
C) cross-functional teams. D) intrapraneurial teams.
Ans C p. 254
Q8-7. As the head of the marketing department, Jody works with her subordinates on a complex and
challenging projects. The level of detail in this work requires Jody to spend a significant amount
of time with her subordinates providing advice and support. Within the marketing department,
Jody probably has a(n) ________ span of control.
A) wide B) narrow
C) unlimited D) functional
Ans B p. 247
Q8-8. The process of rating an organization's practices, processes, and products against the best of the
world is known as:
A) ratio analysis.
B) analysis of variance (ANOVA)
C) competitive benchmarking.
D) a PERT (program evaluation and review technique) analysis
Ans C p. 256

7. Q8-9. Excite Enterprises has decided to let another company that specializes in accounting services
handle all of its financial records and prepare its tax forms. This is an example of:
A) outsourcing. B) functional reassignment.
C) functional inversion. D) benchmarking.
Ans A p. 256
Q8-10. The _____________ consists of the relationships that develop spontaneously as employees meet
and form power centers.
A) informal organization. B) bureaucratic structure
C) secondary organization D) formal organization
Ans A p. 260