HDCS 3369 Final Exam Study Guide, Chapters 13-23
There will be 121 multiple-choice questions from the textbook. Chapter Thirteen: What are the basic ideas forming the foundation of customer loyalty for small firms? o Small businesses possess greater potential for superior customer service than larger firms. o Better customer service leads to greater customer satisfaction. o Greater customer satisfaction results in a positive transactional relationship. How are most customer service problems identified? Through customer complaints. What are the categories of customer profiles and what would be in each category? o Transactions: price paid, SKU o Customer contacts: sales calls and service requests o Descriptive information: demographics, background info for market segmentation o Responses to market stimuli: customer’s responses to direct marketing initiatives, sales contacts, etc. Define perceptions as related to consumers. The individual processes that give meaning to the stimuli confronting consumers; i.e. “on sale” meaning “out of style”. Define attitude. An enduring opinion based on knowledge, feeling and behavioral tendency. Define reference groups. Groups that an individual allows to influence his behavior. Define social classes. Divisions within a society having different levels of prestige; most greatly based on occupation, then possessions, source of income, and education. What are some examples of reference groups? Families, work groups, neighborhood, recreational groups, etc. Chapter Fourteen: Define product mix. The collection of a firm’s total product lines. Define business analysis. Testing to determine if an idea can be profitable. What type of products are warranties important for? Those that are innovative, relatively expensive, purchased frequently, relatively complex to repair, and positioned as highquality goods. What is the most appropriate and effective product strategy to use in the initial stage of a small business? One product, one market When a product strategy includes a new product that is quite different from existing products, is it risky or a brilliant strategy? Most often it is quite risky, but it can be useful for seasonal products or if the market predicts it will be successful. What is the definition of a brand? A verbal and/or symbolic means of identifying a product; i.e. AT&T or the globe logo it uses. Define trademark. A legal term identifying a company’s exclusive right to use a brand; for example, the word Xerox is trademarked. If it is registered, it is identified with an ® rather than a ™.
Define copyright. The exclusive rights of a creator to reproduce, publish, perform, display, or sell his own works. How long does a copyright provide protection? For the duration of the creator’s life plus 70 years. What should a copyright notice include? Three elements: the symbol ©, the year the work was published, and the copyright owner’s name. What does distribution include? Physically moving products and establishing intermediary relationships to support such movement. Why do intermediaries exist in the distribution process? They can often provide more efficient distribution to a wider expanse of locations, marketing and special packaging. What are the three considerations in building a channel of distribution? Costs, coverage (area, number of consumers reached, etc), and control (ease of monitoring marketing, etc.) When is the storage function transferred to the intermediary? After transportation; intermediaries often provide warehouses, etc.
Chapter Fifteen: What is the definition of price? A specification of what a seller requires in exchange for transferring ownership or use of a product or service. What must the price cover in order for the business to be successful? The total cost plus some profit margin. Define cost of goods sold. The cost to the company for acquisition of the actual products offered for sale. What is included in cost of goods sold? How much the company bought the goods for, the shipping charges, etc. Define inelastic and elastic demand. Elastic demand is demand that changes significantly when there is a change in the price of the product; inelastic demand is when it does not change significantly. What is prestige pricing? Setting a high price to convey an image of high quality or uniqueness for competitive advantage. Which category do products that are consumed in fixed amounts fit into, why? Define variable pricing. Setting more than one price for a good or service in order to offer price concessions to certain customers. Define penetration pricing strategy. Setting lower than normal prices to hasten market acceptance of a product or service to increase market share. Define follow-the-leader pricing strategy. Using a particular competitor as a model in setting prices. What does a comprehensive break-even analysis involve? Examining cost-revenue relationships and incorporating sales forecasts. What is the major objective of a firm that begins granting credit? Making more sales by allowing the customer to buy now and pay later. What is a revolving account system? A line of credit on which the customer may charge purchases at any time, up to a pre-established limit.
What is an installment account? A line of credit that requires a down payment, with the balance paid over a specified period of time. What are good sources of consumer credit information? Credit bureaus, trade-credit agencies, the customer’s banker, and other sellers. What is the relationship of slow-paying credit accounts to the seller's working capital? What are the primary purposes of the federal Consumer Credit Protection Act? To ensure that customers are informed about the terms of a credit agreement, and to require creditors to specify how finance charges are computed.
Chapter Sixteen: Define advertising. The impersonal presentation of a business idea through mass media. Define personal selling. A sales presentation delivered in a one-on-one manner. What is a sales promotion? Any promotional techniques that are neither selling nor advertising; i.e. specialty items for branding purposes, etc. Which promotional method(s) does a widely dispersed market favor? Define percentage of sales. A percentage of the dollars earned in revenues that determines the amount put toward promotional expenses. Is the "what can be spared" method used often? Yes, by small firms who don’t know what they’re doing. What is the preferred method of determining promotional expenditures? Deciding what it will take to do the job through market analysis. When is the "spending as much as the competition" method used? As a reaction to shortrun promotional tactics of small competitors. Where is personal selling used? In inside sales of retail, wholesale and service establishments and in outside sales where business customers and end -consumers are called upon. What are the two major steps in preparing for a sales presentation? Prospecting (the process of continually looking for new customers) and practicing the presentation. What are sources of impersonal referrals? Public records and published sources. Be able to recognize examples of the different types of referrals. What categories can customer objections be related to? Price, product, timing, source, service, and need. Be able to recognize an example of a non-financial reward that may motivate a salesperson. Recognition by the firm through plaques, awards, & perks; personal satisfaction What determines the right combination of advertising media? The nature of the business, industry practice, available media, and the firm’s objectives. Why is advertising via the Web appealing? The web has color graphics, 2-way information exchanges, streaming video, 24-hour availability, and global reach. What do the basic methods of Web promotion include? Banner ads, popups, sponsorships and linkages, a corporate website, and direct email promotions. Why is Internet advertising facing an obstacle? The market is flooded so it’s hard to rank well in search engines, and many spam blockers prevent popups and emails from ever reaching the consumer.
Name the nonprofit corporation currently overseeing the global Internet. The Internet Corporation for Assigned Names and Numbers (ICANN). What is one of the biggest reasons Web sites fail to retain customers? Not being userfriendly to navigate or meeting the customer’s information needs. What is the most widely used specialty item? A calendar. Describe specialty items. Promotional items such as pens, key chains, coffee mugs, and shirts that are branded with the company’s name or other identifier. Describe trade show exhibits. They are shows that businesses can bring their products to so that consumers can try them. They are of particular use to manufacturers.
Chapter Seventeen: What are the documented effects of increased economic freedom? What decision should first be made when a small business owner is thinking of going global? Define tariffs. Taxes charged on imported goods. What are the emerging motivations driving global expansion? Expanding markets to find buyers for specialty products and extend the product life cycle; gaining access to raw materials and human resources; cutting labor and transportation costs; capitalizing on special features of the location; and following large client firms that locate abroad. What are international markets demanding? Define economies of scale. Efficiencies that result from expansion in production. What does globalizing early in a company's life lead to? Why are small businesses increasingly expanding internationally? Why have regional free trade areas been formed? What was the intent of the North American Free Trade Agreement (NAFTA)? To encourage free trade among the US, Canada and Mexico by removing trade restrictions such as tariffs. What is an emerging motivation for cutting costs when going global? Obtaining tariff reductions. What is the next step after the entrepreneur has decided to go global? What does the export strategy option involve? Describe importing. Selling goods produced in another country to buyers in the home country. Define licensee and licensor. Licensees are the companies buying license rights, while licensors are the companies selling them. Define economic risk. The probability that a government will mismanage its economy and thereby change the business environment in ways that hinder the performance of businesses operating within. What are the activities that are most fundamental to success abroad when going global? What is the greatest barrier to international expansion? What is a letter of credit and when is it used? An agreement issued by a bank to honor a draft or other demand for payment when specified conditions are met; it is used to assure the seller of prompt payment when involved in a foreign transaction.
What is a bill of lading used for? To indicate that a product has been shipped and its title has been transferred.
Chapter Eighteen: Do typical entrepreneurs lack managerial expertise or not? What are the stages in the growth of a business and what are they characterized by? What is the tyranny of the urgent? The folly of small businesses in which they never get around to planning because their time is dominated by dealing with current issues. What kind of plan is a budget? A short-range plan that expresses future plans in monetary terms. What is the difference between a short-range plan and a strategic plan? Strategic plans are long-term, while short-range plans deal with planning for a future period of 1 year or less. What length of time does a strategic plan normally cover? Any extended time into the future, but it is most feasible to forecast for 3-5 years. What is the most likely form of organizational structure for small businesses? Line organization in which each person reports to one supervisor. As the business grows, how does the structure change? The entrepreneur’s span of control peaks and he must institute intermediate levels of management. Define span of control. The number of subordinates supervised by one manager. What should be the first step in planning and improving one's use of time? Analyzing how much time is normally spent on various activities. Define a business incubator. Define SCORE. The Service Corps of Retired Executives, an SBA-sponsored group who gives free advice to small businesses. Define networking. The process of developing and engaging in mutually beneficial relationships. Chapter Nineteen: What should be done with applications of qualified walk-ins if they cannot be hired immediately? They should be kept on file for future reference. What type of personnel may be found at secondary and trade schools? Why would a small business use the public employment office? What does the public employment office charge for services rendered? Define headhunter. A search firm that locates qualified candidates for executive positions. What are the legal reasons for selecting employees? What can an employer discover during an interview? Is drug testing legal when hiring employees? How long does orientation for an employee last? The first two to three days on the job. Why do managerial and professional employees in small businesses need training? What role does compensation play in attracting and motivating employees? When is a compensation system based on time most appropriate? How do management and other key personnel "get a piece of the action"? Are profit-sharing plans more of an incentive in small or large firms?
When companies lease employees to small businesses what services do they provide? When should a growing business consider hiring a human resource manager?
Chapter Twenty: How is quality defined by the American Society for Quality Control? What are the essential elements of successful quality management? Who is the ultimate judge of product quality? What is a quality circle? A group of employees who meet regularly to discuss qualityrelated problems. Is quality management applicable to both service and manufacturing businesses or neither of these? What types of businesses include an operations process? What does the plant maintenance function include? What is included in preventive maintenance programs? What is the ABC method of inventory management? Why is it used? Inventory management method that categorizes items in terms of importance. Thus, more emphasis is placed on higher dollar value items (As) than on lesser dollar value items (Bs), while the least important items (Cs) receive the least time and attention. What is a just-in-time inventory system? A method of reducing the inventory level to the absolute minimum. What is the relationship to suppliers when the just-in-time inventory system is used? Chapter Twenty-One: Define risk. The possibility of suffering harm or loss, especially losses associated with the assets and earning potential of the firm. What are the ways of sharing business risks and what is one of the most important ways of sharing those risks? What is self-insurance? Designating a part of a firm’s earnings as a cushion against possible future losses. Be able to identify what the different types of losses are. Define deterrent punitive damages. Damages not awarded in order to compensate the plaintiff, but in order to reform or deter the defendant and similar persons from pursuing a course of action such as that which damaged the plaintiff. What types of losses is insurance the most applicable and practical for? What is business interruption insurance? Reimbursements for lost income plus continuing expenses due to direct loss impacting business revenues. What does business interruption insurance cover? If your location is damaged in such a way that your daily operations cannot continue and your business cannot function. What does general liability insurance cover? Bodily injury and property damage for which the business is liable. What is key-person insurance? Benefits upon the death of a firm’s key personnel. What are business risks that may not be insured against? Chapter Twenty-Two:
What is cash conversion period? The time required to convert paid-for inventories and accounts receivable into cash. How is net cash flow determined? Be able to compare net cash flow and net profit. Define net cash flow. The difference between inflows and outflows. What should be done when a small business has idle funds? Why is it that inventory sometimes called "evil"? Because product supply and consumer demand don’t always match up, and a loss may be incurred. What does "3/10, net 30" mean? 3% discount if paid in ten days, due in 30 days. What is the main purpose of capital budgeting? To help managers make decisions about long-term investments. What does the payback period technique compute? The amount of time it will take to recover the cash outlay of an investment. What is the accounting return on investment technique and how easy is it to calculate? A capital budgeting technique that evaluates a capital expenditure based on the expected average annual after-tax profits relative to the average book value of an investment. What is a reason that a small firm would NOT use a discounted cash flow technique in evaluating capital investments?
Chapter Twenty-Three: How often do most small firms need to have financial statements generated? Monthly. What should the accounting system used allow the small business to do? Which records reveal the degree of effectiveness of a firm's credit and collection policies? Accounts receivable. What must the accounting option that the business chooses for financial reporting do? What is the major distinction between the cash method and the accrual method of accounting? The point at which the firm reports revenue and expenses. What is the advantage of the double-entry bookkeeping system over the single-entry system? Which method/system of accounting reports revenue and expenses when they are incurred regardless of when cash is received or payment made? The accrual method What does a single-entry system include? A checkbook system of receipts and disbursements. Does a double-entry system include a self-balancing mechanism and what does that mean? Yes, in that it has two counterbalancing entries for each transaction recorded. What does the current ratio measure for the firm? Liquidity; this ratio shows the value of current assets relative to current liabilities. This is the inverse of the current percent in debt measure when looking at solvency measures. It is a relative measure rather than an absolute dollar measure. The higher the ratio, the greater the liquidity of the business. Define liquidity. The ability of the business to pay off any debts owed. How is an acid-test ratio calculated and what does it tell you? When a firm borrows money, what is the minimum that it required to pay? What does total asset turnover tell the business manager? How effectively management is using the firm’s assets to generate sales (how well it is managing its balance sheet).
What do turnover ratios for accounts receivable and inventories represent?