chapters 5 thru 8 for study

8/20/2019 Chapters 5 THRU 8 for Study

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CHAPTER 5

5-1. The corporation is the most common form of business ownership.

Answer: False LG: 1/LL: 1 Page: 1!

5-!. The three ma"or forms of business ownership in the #.$. are sole proprietorships%partnerships% an& corporations.

Answer: True LG: 1/LL: 1 Page: 1!

5-. 'nce a business is establishe&% it(s almost impossible to change from one formof business ownership to another.

Answer: False LG: 1/LL: 1 Page: 1!

5-5. A comparison of the three ma"or forms of business ownership shows that soleproprietorships are usuall) the most &ifficult t)pe of business to establish.

Answer: False LG: 1/LL: 1 Page: 1*

5-+. The first step in starting a sole proprietorship is to fill out a proprietorship charterapplication form an& file it with the state go,ernment.


5-. The profits of a sole proprietorship are tae& as the personal income of the

owner.

Answer: True LG: 1/LL: 1 Page: 1*

5-1. A ma"or a&,antage of sole proprietorships is that an owner has limite& liabilit) forthe &ebts of his or her business.


5-1!. The &ebts of a business operate& as a sole proprietorship are consi&ere& to bethe personal &ebts of the owner of the business.

Answer: True LG: 1/LL: 1 Page: 1*-1

5-1*. A &rawbac0 of sole proprietorships is that the) usuall) ha,e limite& access toa&&itional financial resources.

Answer: True LG: 1/LL: 1 Page: 1



5-1. An a&,antage of forming a sole proprietorship is that it allows the owner to ha,emore time for leisure acti,ities.

Answer: False LG: 1/LL: 1 Page: 1

5-15. im wants to start a business. 2e is attracte& b) the i&ea of being his own boss%

an& wants to get starte& with a minimum of epense an& hassle. 2e is ,er)confi&ent in his abilities% so he is not particularl) worrie& about financial ris0s. Allof these factors suggest that im woul& fa,or starting his business as a soleproprietorship.

Answer: True LG: 1/LL: ! Page: 1*

3ationale: People who want to be their own boss often prefer to operate theirbusiness% at least initiall)% as a sole proprietorship. Another a&,antage of the soleproprietorship is that it is a relati,el) eas) an& inepensi,e form of business toset up. 'ne &rawbac0 of a sole proprietorship is that the owner has unlimite&liabilit). 2owe,er% im is not worrie& about ris0% so this woul& not appear to be a

ma"or problem for him.

5-1+. 4f a sole proprietorship fails% the owner ma) lose whate,er was in,este& in thebusiness% but the owner(s personal assets are not at ris0.

Answer: False LG: 1/LL: ! Page: 1*-1

3ationale: $ole proprietors ha,e unlimite& liabilit) for the &ebts of their business.This means that if their business gets into financial trouble the) can lose theirpersonal assets.

5-1. A general partner can ta0e an acti,e role in the management of the business.

Answer: True LG: !/LL: 1 Page: 15

5-!. All of the partners in a general partnership ha,e limite& liabilit) for the &ebts oftheir firm.

Answer: False LG: !/LL: 1 Page: 15

5-!1. 4n a general partnership% all owners share in both management of the businessan& in the assumption of liabilit) for the firm(s &ebts.


5-!. A limite& partner is an owner who ta0es no management responsibilit) an& hasno liabilit) for losses be)on& the amount in,este&.




5-!6. Accor&ing to the #niform Partnership Act% the three 0e) elements of an) generalpartnership are 718 shares of stoc0 to represent ownership% 7!8 limite& liabilit)%an& 7*8 ease of ownership transfer.


5-!. A recent stu&) showe& that partnerships are more li0el) to fail than soleproprietorships.

Answer: False LG: !/LL: 1 Page: 1+

5-!. A ma"or ob"ecti,e of limite& liabilit) partnerships 7LLPs8 is to limit each partner(spersonal liabilit) to the conse9uences of their own acts an& those of peopleun&er their super,ision.


5-*!. 4n or&er to protect all parties an& minimie misun&erstan&ings among partners%all terms of the partnership shoul& be spelle& out in writing.


5-**. 'ne a&,antage of a partnership is that there is a simple process for partners toterminate their business.


5-*. ;ompare& to sole proprietorships% an a&,antage of partnerships is their abilit) toobtain more financial resources.


5-*+. ;ompare& to sole proprietorships% partnerships offer the a&,antage of share&management an& poole& 0nowle&ge.

Answer: True LG: !/LL: 1 Page: 15-1+

5-*6. A limite& partnership refers to a partnership set up for a temporar) purpose% suchas a real estate &e,elopment pro"ect.


5-*. Te& an& <ar0 ha,e been partners in a &r) cleaning business for the past three)ears. The) woul& li0e their brother To&& to "oin them. #nfortunatel)% partnershiplaw states that onl) two partners can participate in a partnership.

Answer: False LG: !/LL: ! Page: 15

3ationale: A partnership consists of two or more owners.



5-. $haron Pebble an& Gilbert $tone ha,e "ust forme& a business partnership. #n&er their arrangement% $haron will acti,el) manage the compan) an& assumeunlimite& liabilit) for the firm(s &ebts. Gilbert will in,est se,eral thousan& &ollarsof his mone) an& will share in the profits% but will not acti,el) manage the firman& will not ha,e liabilit) for losses be)on& his initial in,estment. $haron an&Gilbert ha,e forme& a limite& partnership.

Answer: True LG: !/LL: ! Page: 15

3ationale: A limite& partnership consists of at least one general partner% who hasunlimite& liabilit)% an& at least one limite& partner% who can lose onl) what he orshe has in,este&. The limite& partner cannot acti,el) manage the partnership.

5-1. Alphono has agree& to become a partner in his brother(s new clothing store an&has pro,i&e& * percent of the startup capital for 3emora=s ;lothiers. $ince hepro,i&e& * percent of the mone) to start the firm% he is legall) entitle& to *percent of an) the profits the firm earns &uring its first )ear of operations.

Answer: False LG: !/LL: ! Page: 1+-16

3ationale: The &i,ision of profits in a partnership is negotiable an& is notnecessaril) tie& to the amount of the initial in,estment.

5-!. 3on an& on want to go into business together. The) &o not want to bring in other partners% but the) both want to a,oi& unlimite& liabilit) for an) &ebts incurre& b)their new compan). 3on an& on can achie,e their aims b) organiing the firm asa limite& partnership.


3ationale: All partnerships% inclu&ing limite& partnerships% must inclu&e at leastone general partner. The general partners in a limite& partnership must acceptunlimite& liabilit). Thus% if 3on an& on form a limite& partnership the) will eitherha,e to bring in another person to be the general partner% or one of them willha,e to be the general partner an& accept unlimite& liabilit).

5-. ;onnie is a general partner in a retail coo0ie store. 2er personal assets areprotecte& from the &ebts of the business.


3ationale: As a general partner% ;onnie assumes unlimite& liabilit) for the &ebts

of her business.

5-5. A con,entional corporation is a state-chartere& legal entit)% with authorit) to actan& ha,e liabilit) separate from its owners.

Answer: True LG: */LL: 1 Page: 1



5-. A corporation can raise financial capital b) selling shares of stoc0 to intereste&in,estors.


5-. $toc0hol&ers in a corporation must accept unlimite& liabilit) for the corporation=s&ebts.

Answer: False LG: */LL: 1 Page: 1

5-51. >hen one of the owners of a corporation &ies% the corporation legall) ceases toeist.


5-5!. ;orporations are eas) to start an& eas) to terminate.


5-5*. A &isa&,antage of corporations is that the) generall) re9uire etensi,epaperwor0.


5-5+. The stoc0hol&ers in a corporation elect a boar& of &irectors to o,ersee thecompan)=s ma"or polic) issues.

Answer: True LG: */LL: 1 Page: 15-151

5-56. $toc0hol&ers in a corporation ha,e limite& liabilit) for the &ebts of thecorporation.


5-5. 'ne a&,antage of corporations is that the initial cost of setting them up is usuall)lower than for other forms of ownership.


5-+1. 'ne reason 4n&i,i&uals incorporate is to obtain the a&,antage of limite& liabilit).

Answer: True LG: */LL: 1 Page: 15!

5-+!. 'ne a&,antage of an $ ;orporation is that the profits of the business are tae&as regular personal income of the owners% thus a,oi&ing the problem of &oubletaation.

Answer: True LG: */LL: 1 Page: 15!-15*



5.+*. An) corporation can 9ualif) to be classifie& as an $ corporation as long as it fillsout an& files the proper paperwor0 with the appropriate state agenc) on anannual basis.

Answer: False LG: */LL: 1 Page: 15*

5-+5. The a&,antages of limite& liabilit) companies are not a,ailable to pro,i&ers ofpersonal ser,ices li0e &octors an& law)ers.

Answer: False LG: */LL: 1 Page: 15*

5-+. A limite& liabilit) compan) is similar to an $ corporation% but without the specialeligibilit) re9uirements.

Answer: True LG: */LL: 1 Page: 15*

5-+. Limite& liabilit) companies ha,e both fleibilit) in ta treatment of earnings an&

limite& liabilit) protection for owners.

Answer: True LG: */LL: 1 Page: 15*

5.61.Li0e stoc0hol&ers of a ; corporation% owners of a limite& liabilit) compan) 7LL;8are free to sell their ownership without the appro,al of other members.

Answer: False LG: */LL 1 Page: 15

5-6!. 'wners of limite& liabilit) companies 7LL;s8 must pa) self-emplo)ment taes onan) profits the) earn.


5-6. ?r. >right is intereste& in incorporating as an in&i,i&ual. >hile this is legall)possible% there are reall) no a&,antages to &oing so.

Answer: False LG: */LL: ! Page: 15!

3ationale: <an) in&i,i&uals choose to incorporate to obtain limite& liabilit). 4nsome cases% the) ma) also recei,e ta sa,ings b) &oing so.

5-65. @utt) ?ough is a small chain of &onut shops that is currentl) owne& an& operate&b) a group of se,en partners. The owners thin0 that their chain has the potential

for rapi& growth% but se,eral of the partners are concerne& about the growingfinancial ris0s that will accompan) this growth. 'ne wa) the partners coul& &ealwith this problem woul& be to incorporate their business.

Answer: True LG: */LL: ! Page: 15

3ationale: ecause the) can issue shares of stoc0 an& bon&s% an& often fin& iteasier to obtain loans from financial institutions% corporations usuall) ha,e easieraccess to financial resources than unincorporate& businesses. Another



a&,antage of corporations is that the) pro,i&e their owners 7stoc0hol&ers8 withthe protection of limite& liabilit).

5.6+. >hen Brica >a)ne &eci&e& to start a business she chose to form it as acorporation. This choice ensures that% as the foun&er an& incorporator of thecompan)% Brica will remain in control of the firm=s operations as long as she

wants% no matter how large or comple the business becomes.

Answer: False LG: */LL: ! Page: 151

3ationale: 'ne potential &rawbac0 of incorporation is the possibilit) of conflictbetween the entrepreneurs who originall) start a business an& the stoc0hol&ersan& boar& of &irectors who ma) e,entuall) gain control. The tet cites the casesof 3o& ;anion of ;ompa9 an& $te,e obs of Apple ;omputer as eamples ofentrepreneurs who were force& out of the ,er) companies the) foun&e&.

5-66. <o"o <otors is a rather small con,entional corporation with onl) !1!

stoc0hol&ers. Ble,en of the stoc0hol&ers are citiens of <eico who li,e in<eico ;it)% an& eight more are citiens of ;ana&a who li,e in Toronto. <o"o<otors shoul& organie as an $ corporation in or&er to sa,e on taes.

Answer: False LG: */LL: ! Page: 15*

3ationale: <o"o <otors &oes not satisf) the re9uirements for an $ corporation--ithas more than 65 stoc0hol&ers% some of whom are not #.$. citiens orpermanent resi&ents of the #nite& $tates.

5-6. The partners at B&gar(s <icrobrewer) woul& li0e to switch to an $ corporation.#nfortunatel)% their law)er has tol& them that the) &o not meet some of the

re9uirements necessar) to 9ualif) as an $ corporation. An alternati,e form ofbusiness that woul& gi,e them similar a&,antages is a limite& liabilit) compan).

Answer: True LG: */LL: ! Page: 15*

3ationale: Limite& liabilit) companies offer man) of the same a&,antages as $corporations% inclu&ing limite& liabilit) an& the possibilit) of taation li0e apartnership% without the special eligibilit) re9uirements re9uire& to 9ualif) for $corporation status.

5-6. The owners of the new ;hillout 4ce ;ream ;ompan) ha,e chosen to organietheir business as a limite& liabilit) compan). 'ne &rawbac0 of this form of

ownership is that the owners will pa) higher taes on their earnings than aregular corporation if their compan) grows rapi&l).

Answer: False LG: */LL: ! Page: 15*

3ationale: 4n terms of taes% a limite& liabilit) compan) offers the best of allworl&s% allowing the owners to choose to be tae& as a partnership or acorporation &epen&ing on which ta rates woul& benefit them the most.



5-1. 4n a merger% two firms combine to form one compan).

Answer: True LG: /LL: 1 Page: 15+

5-*. An ac9uisition is when one compan) bu)s the propert) an& obligations of another

compan).


5-+. 4n a conglomerate merger% firms in the same in&ustr) merge to epan& theirshare of the mar0et.

Answer: False LG: /LL: 1 Page: 156

5-. A merger between two businesses in &ifferent stages of relate& businesses is0nown as a ,ertical merger.


5-1. >hen a group of in,estors ta0e a firm pri,ate% the) obtain all of the stoc0 forthemsel,es.

Answer: True LG: /LL: 1 Page: 156

5-. 4n the past% the eir&erg=s <ar0ets an& ronew=s Groceries ha,e been fiercecompetitors in the grocer) mar0et. 2owe,er% the) recentl) issue& a "ointannouncement stating their &ecision to merge. The announcement "ustifie& thepropose& merger b) claiming that the resulting firm woul& ha,e more financialresources% which woul& enable it to epan& ser,ices an& broa&en offerings to

consumers. This propose& merger is an eample of a horiontal merger.

Answer: True LG: /LL: ! Page: 156

3ationale: A merger between two firms in the same in&ustr)% such as two grocer)store chains% is a horiontal merger.

5-+. A ma"or ob"ecti,e of a le,erage& bu)out is to enable in,estors to gain control of acompan) b) issuing new shares of ownership% thus minimiing the use of &ebt.

Answer: False LG: /LL: ! Page: 156

3ationale: Le,erage& bu)outs in,ol,e financing the ac9uisition of an organiationthrough the use of &ebt financing.

5-6. ane Gramm is lea&ing a group of stoc0hol&ers who want to ta0e the igbu;orporation pri,ate. 4f ane(s group succee&s% igbu(s stoc0 will no longer bea,ailable to in,estors on the open mar0et.




3ationale: Ta0ing a firm pri,ate in,ol,es gaining control of a firm(s stoc0 so that itis no longer a,ailable to in,estors on the open mar0et.

5-. The wor0ers at $crapp)=s <etal Fabrication% 4nc.% ha,e learne& that the firm isabout to close &own. The) ha,e &e,ise& a plan to use &ebt financing to bu) thecompan)(s stoc0 from current sharehol&ers with the intention of 0eeping the

compan) in business% thus sa,ing their "obs. This strateg) is calle& a le,erage&bu)out.


3ationale: A le,erage& bu)out in,ol,es the use of &ebt financing to bu) the stoc0of a compan). This is what the wor0ers are attempting to &o in this eample.

5-1. A franchise agreement is an arrangement where a franchisor sells the rights to abusiness name an& to sell a pro&uct or ser,ice within a gi,en territor) to afranchisee.


5-11. A franchise ma) be organie& as a sole proprietorship% partnership% orcorporation.


5-15. 4n a franchise arrangement% ownership of all of the in&i,i&ual stores or outletsremains in the han&s of the franchisor.


5-1+. 'ne of the ma"or a&,antages of a franchise s)stem is the franchisee often getsinstant recognition from consumers.


5-16. Franchisees must follow more rules% regulations% an& proce&ures than if the)operate& in&epen&entl) owne& businesses.

Answer: True LG: 5/LL: 1 Page: 1+

5-1. The Ccoattail effectD refers to the bur&en of corporate rules an& regulations onfranchisees.

Answer: False LG: 5/LL: 1 Page: 1+

5-111. The franchisee often must pa) the franchisor a share of profits or a percentagecommission on sales 0nown as a ro)alt).




5-11+. Franchising in global mar0ets has &emonstrate& that high operating costs arecounterbalance& b) high profit opportunities.


5-1!1. Les is a franchisee in the Far 2orions Tra,el Agenc) franchise. As a franchisee%Les is guarantee& the right to retain all of his franchise(s profits.

Answer: False LG: 5/LL: ! Page: 1+

3ationale: Franchisees usuall) pa) a ro)alt) to the franchisor. This ro)alt) issometimes epresse& as a share of the franchisee(s profits.

5-1!!. Leanne is a franchisee in a restaurant chain. Than0s mainl) to her har& wor0 an&people s0ills% her in&i,i&ual outlet is &oing 9uite well. 2owe,er% she has notice&that se,eral other franchisees in the same chain ha,e let their businesses&eteriorate% especiall) in terms of the 9ualit) of the foo& the) offer. Leanne

shoul& be ,er) concerne& about this tren&% since it e,entuall) coul& affect herown business.

Answer: True LG: 5/LL: ! Page: 1+

3ationale: The actions of less successful franchisees can hurt the success ofothers in the same franchise. This is 0nown as the coattail effect.

5-1!5. A cooperati,e consists of people with similar nee&s who pool their resources formutual gain.

Answer: True LG: +/LL: 1 Page: 1+5

5-1!+. 4t is not unusual for members of cooperati,es to wor0 for an& help manage theircooperati,e.


5-1!6. Farm cooperati,es were originall) establishe& to help farmers increase theireconomic power b) acting as a group rather than as in&i,i&uals.


5-1**. The EEEEEEEEEEE is the most common form of business ownership.

A8 partnership.8 corporation.;8 "oint ,enture.?8 sole proprietorship.

Answer: ? LG: 1/LL: 1 Page: 1!



5-1*. A EEEEEEEEEEE is a business organiation that is owne&% an& usuall) manage&%b) one person.

A8 close& corporation.8 subchapter $ corporation.;8 sole proprietorship.

?8 limite& partnership.

Answer: ; LG: 1/LL: 1 Page: 1!

5-1*5. EEEEEEEEEEEE comprise about ! of all businesses but account for about 6of all business receipts.

A8 ;orporations8 Partnerships;8 $ole proprietorships?8 Limite& liabilit) companies

Answer: A LG: 1/LL: 1 Page: 1!

5-1!. An) &ebts or &amages incurre& b) a firm organie& as a sole proprietorship are: A8 the sole responsibilit) of the owner.8 limite& to the amount the owner has in,este& in the firm.;8 pai& for out of a reser,e contingenc) fun& that sole proprietors are re9uire&

b) law to set up.?8 normall) co,ere& b) liabilit) insurance.

Answer: A LG: 1/LL: 1 Page: 1*-1

5-1*. An entrepreneur who wishes to start a business with little &ela) or hassle% an&who wants to be his or her own boss% shoul& organie the business as a:

A8 sole proprietorship.8 cooperati,e.;8 ; corporation.?8 general partnership.

Answer: A LG: 1/LL: ! Page: 1*

3ationale: Two a&,antages of sole proprietorships are ease of starting 7an&en&ing8 an& being )our own boss.

CHAPTER 6

TRUE/FALSE

+-1.Bntrepreneurship in,ol,es accepting the ris0 of starting an& running a business.




+-!.Bntrepreneurship is another name for management.


+-*.<an) business starte& b) entrepreneurs ha,e grown into ma"or corporations

emplo)ing thousan&s of wor0ers.

Answer: True LG: 1/LL: 1 Page: 16 -165

+-.Bntrepreneurs are moti,ate& b) the &esire to earn a profit.


+-5. $uccessful entrepreneurs accept the ris0 of failure.


+-+. 4t is important for an entrepreneur to be highl) energetic.


+-6. Potential entrepreneurs woul& be well a&,ise& to surroun& themsel,es withpeople who are smarter than the) are.

Answer: True LG: 1/LL: 1 Page: 166% Figure +.1

+-. Bntrepreneurial teams combine the creati,e mar0eting an& pro&uction i&eas of agroup of eperience& people. .


+-. <icropreneurs is a term use& to &escribe entrepreneurs who focus on thecontinue& growth of their businesses.


+-1. The most important &ifference between entrepreneurs an& micropreneurs is thefocus place& b) micropreneurs on balancing the &eman&s of wor0 an& famil).


+-11. <icropreneurs are moti,ate& b) a &esire to ha,e both a satisf)ing famil) life an&rewar&ing wor0.


+-1!. >eb-base& businesses a,oi& the ris0 of failure face& b) tra&itional startupbusinesses.




+-1. The management of a nonprofit organiation is much the same as themanagement of small an& large businesses.


+-!. 'f all nonfarm businesses in the #nite& $tates% almost 6 percent are consi&ere&

small b) the $mall usiness A&ministration 7$A8 stan&ar&s.


+-!1. Large firms ha,e a greater abilit) to pro,i&e personalie&% fast responsecustomer ser,ice than &o small business organiations.


+-!!. About of Americans fin& their first "obs in small businesses.


+-!*. The number of women owning small businesses has grown slowl).


+-!. <an) small businesses list the lac0 of 9ualifie& wor0ers as one of their biggestobstacles to growth.


+-!5. <ost business opportunities offer entrepreneurs high le,els of securit) an&profits.

Answer: False LG: !/LL: 1 Page: 1+

+-!+. The easiest businesses to start also ha,e the least growth potential an& thegreatest failure rates.

Answer: True LG: !/LL: 1 Page: 1+

+-!6. >hile the first "ob for man) people is wor0ing for a small business% most of thepermanent new "obs are create& b) larger corporations.


3ationale: Bmplo)ment in large companies has been &eclining for man) )ears.Iirtuall) all "ob growth is pro,i&e& b) small businesses.



+-**.$haraf &eci&e& to wor0 for a floral &esign shop before opening her own shop. $hewill fin& that this was a waste of time as her wor0 is use& to ma0e someone elsesuccessful.

Answer: False LG: */LL: ! Page: 16

3ationale: $haraf will gain ,aluable training an& insights into the floral &esignbusiness b) wor0ing for someone else. 2er eperience shoul& re&uce her ris0san& help her operate more efficientl) when she starts her own business.

+-*.The personal character of an entrepreneur is irrele,ant to ban0ers when&etermining the cre&it worthiness of business loan.


+-*5.$oftware &esigne& to help create business plans has pro,en to be of little ,aluebecause of the great ,ariet) in the t)pes of businesses.


+-*+.Potential suppliers can be an ecellent source of financing for a new business sincelen&ing mone) to a new customer ma) be ,er) much in their own interest.

Answer: True LG: /LL: 1 Page: 1

+-*6.$tate an& local go,ernments often act as ,enture capitalists.

Answer: False LG: /LL: 1 Page: 1!

+-*.Ienture capitalists pro,i&e fun&s for small businesses as part of their philanthrop)

programs.

Answer: False LG: /LL: 1 Page: 1!

+-*.As a result of corporate &ownsiing% <argo lost her "ob as the &irector of humanresources at a ma"or steel pro&ucer. 2owe,er% she too0 this opportunit) toestablish her own business pro,i&ing temporar) emplo)ees to area businesses.<argo has li0el) foun& that:

A8 going into business for )ourself can 9uic0l) pro,i&e securit) an& profits.8 there aren(t man) women going into small business.;8 the ser,ice sector is not an area of significant growth.?8 successful big businesses often create profitable opportunities for small

businesses.

Answer: ? LG: !/LL: * Page: 15

3ationale: As big businesses &ownsie% the) often fin& that the) &o not alwa)sha,e the staff the) nee& an& are increasingl) contracting with small companies totemporaril) fill their nee&s through outsourcing. That(s how it is in business. igbusinesses &on(t ser,e all the nee&s of the mar0et. There is plent) of room forsmall companies to ma0e a profit filing those niches.



+-.For prospecti,e entrepreneurs% enrolling in an 4ntro&uction to usiness or $mallusiness <anagement course offere& through their communit) college:

A8 is li0el) to be waste& time since college courses ten& to be too theoretical.8 can be helpful b) offering them an opportunit) to meet eperience& small

business owners.

;8 woul& be most helpful after starting their business ,enture.?8 woul& offer training e9ui,alent to two )ears of on-the-"ob eperience.

Answer: LG: */LL: ! Page: 16

3ationale: 'ne of the best things about small business courses offere& b)communit) colleges is that the) can bring together entrepreneurs. The a&,iceeperience& entrepreneurs can share with those "ust getting starte& can bein,aluable.

+-1.<oti,ate& b) his &esire to operate his own business% ;aleb is consi&ering thepurchase an eisting business. As he carefull) weights this option% he is li0el) to

fin& that: A8 ,er) few owners of small businesses ha,e an) interest in selling.8 his potential for success woul& greatl) impro,e if he starte& his own new firm.;8 the ,alue of an eisting business is &etermine& b) what the business owns%

what it earns% an& what ma0es it uni9ue.?8 an) entrepreneur willing to sell their business is eperiencing serious

financial problems.

Answer: ; LG: */LL: ! Page: 1

3ationale: The ,alue of a firm is base& on three things: what it owns% what itearns% an& what ma0es it uni9ue.

+-!.The business plan of a new entrepreneur shoul& inclu&e all of the following except: A8 target mar0et.8 capital re9uire&.;8 competiti,e a&,antages.?8 names of emplo)ees.

Answer: ? LG: /LL: 1 Page: 1

+-*.After personal sa,ings% the net largest source of capital for entrepreneurs hasbeen from

A8 large multinational ban0s.

8 the $mall usiness A&ministration.;8 state an& local go,ernments.?8 in&i,i&ual in,estors.

Answer: ? LG: /LL: 1 Page: 1!



+-.>hich of the following go,ernment agencies is responsible for encouraging the&e,elopment of small businessK

A8 $mall usiness A&ministration.8 Fe&eral Tra&e ;ommission.;8 Bntrepreneur Assistance ;enter.

?8 Fe&eral <icroloan Authorit).

Answer: A LG: /LL: 1 Page: 1!

+-5.$mall business owners often struggle in attracting 9ualifie& wor0ers. >hich of thefollowing &oes not contribute to this problemK $mall firms offer:

A8 less attracti,e fringe benefits than offere& b) larger firms.8 lower wages than pai& b) large corporations.;8 limite& room for a&,ancement.?8 a lac0 of challenging "obs.

Answer: ? LG: /LL: 1 Page: 1

+-+.A goo& business plan will: A8 focus on the big picture an& omit the small &etails of operating the business.8 &escribe all aspects of the business% inclu&ing pro&uct% the target mar0et% the

nature of the competition% an& the owners= resources an& 9ualifications.;8 be purposefull) ,ague% since specifics can restrict creati,it) an& fleibilit).?8 focus on the nature of the business an& the target mar0et% omitting personal

information about the owner in or&er to a,oi& personalit) issues.

Answer: LG: /LL: ! Page: 1

3ationale: A business plan is a &etaile& written statement that &escribes the

nature of the business% the target mar0et% the a&,antages the business will ha,erelati,e to competitors an& the resources an& 9ualifications of the owner.

+-6.>hen see0ing financial bac0ing from a ,enture capitalist% a small business ownershoul& realie that the ,enture capitalist will:

A8 charge an interest rate that is much higher than an) other len&er.8 not be intereste& in the management of the business.;8 epect an ownership sta0e in the compan) in echange for the financial

bac0ing.?8 &eman& that the mone) be repai& within &a)s or less.

Answer: ; LG: /LL: ! Page: 1!

3ationale: Ienture capitalists often as0 for a heft) ownership sta0e in a businessin echange for the cash nee&e& to get that business starte&.



+-.A mar0et consists of potential bu)ers of a goo& or ser,ice. 2owe,er% for a mar0etto eist:

A8 wholesalers an& retailers are in,ol,e& in the &istribution of the pro&uct.8 one firm must &ominate in sales an& pro&uct &e,elopment.;8 people must ha,e unsatisfie& wants an& nee&s as well as a willingness an&

abilit) to bu).?8 the pro&uct must be laborator) teste& an& appro,e& b) the Fe&eral Foo& an&

?rug A&ministration 7F?A8.

Answer: ; LG: /LL: ! Page: 1

3ationale: A mar0et consists of people who ha,e unsatisfie& wants an& both thewillingness an& the resources necessar) to bu) the goo& or ser,ice.

+-.ubba% a license& real estate bro0er% recei,e& notification that his application for abusiness loan was &enie&. The ban0 refuse& his re9uest because he faile& to

pro,i&e a blueprint i&entif)ing the inten&e& target mar0et an& competiti,estrateg). 4n or&er secure a ban0 loan ubba e,i&entl) nee&s a:

A8 ban0ruptc) law)er.8 business plan.;8 ,enture capitalist.?8 loan a&,ocate.

Answer: LG: /LL: * Page: 1

3ationale: A business plan pro,i&es a &etaile& written statement of the nature ofa firm% its target mar0et% its competiti,e a&,antages% an& the resources an&9ualifications of its owner.

+-5.As a EEEEEEEE 3ic0 searches for firms in nee& of a&&itional fun&ing to achie,etheir goals. 4n return for his in,estment% 3ic0 becomes a part owner in thebusiness.. 3ic0 operates as a7n8:

A8 in,estment anal)st.8 ,enture capitalist.;8 corporate rai&er.?8 securities tra&er.

Answer: LG: /LL: * Page: 1!

3ationale: A ,enture capitalist is an in&i,i&ual or firm that pro,i&es startup capitalin echange for a sta0e in the ownership of the business.



As a small business owner% Tani0a can(t affor& to pro,i&e her emplo)ees with the highwages an& benefits offere& b) big corporations. 'ne wa) to retain her emplo)ees an&create a high le,el of moti,ation woul& be to:

A8 threaten to fire her eisting emplo)ees an& hire new wor0ers.8 a&opt a polic) of promoting the wor0ers who ha,e been emplo)e& the

longest.;8 empower her emplo)ees to &e,elop their own i&eas?8 hire onl) famil) members% since the) are more lo)al.

Answer: ; LG: /LL: * Page: 1

3ationale: <an) small firms moti,ate wor0ers b) creating challenging "obs an&treating them respectfull).

+-51.'ne reason wh) man) #.$. small businesses are not in,ol,e& in eporting is: A8 there is a limite& mar0et for their pro&ucts.8 the go,ernment=s new homelan& securit) programs limit opportunities for

small businesses.;8 man) of these firms &o not 0now how to get starte&.?8 #.$. pro&ucts are percei,e& as inferior.

Answer: ; LG: 5/LL: 1 Page: 16

+-5!.>hich of the following best &escribes the opportunities a,ailable to smallbusinesses in international mar0etsK

A8 The worl& is a much larger% an& potentiall) more lucrati,e% mar0et than the#.$. &omestic mar0et.

8 The threat of terrorist acti,ities pre,ents small businesses from competing

internationall).;8 <ost foreign bu)ers prefer to &eal with large% well-0nown corporations rather

than small businesses.?8 2igher business costs eliminate the profit opportunities in global mar0ets.

Answer: A LG: 5/LL: ! Page: 16

3ationale: The #.$. has onl) about 5 of the worl&(s population% an& there is agrowing &eman& for American goo&s an& ser,ices. The ;ommerce ?epartmentreports that while onl) a small percentage of small businesses eport% thenumber of small businesses in,ol,e& in eporting has triple& in the last &eca&e.



Pepp) is confi&ent that Pia >hirl will be a success% but onl) if he has enoughmone) to &o things right. $ince Pepp) has ,er) little personal wealth% he 0nowshe must obtain financial help. 4n or&er to be prepare& for meetings with ban0ersan& potential in,estors% Pepp) shoul&:

A8 hire a public relations firm to &e,elop promotional materials.

8 &e,elop a business plan.;8 rea& a boo0 on entrepreneurship.?8 create a partnership contract.

Answer: LG: /LL: * Page: 11

3ationale: A business plan% which pro,i&es a &etaile& &escription of the newbusiness% is man&ator) when meeting with ban0ers an& in,estors.

CHAPTER 7

TRUE/FALSE

6-. To&a)=s wor0ers re9uire a &ifferent managerial st)le than wor0ers of pre,iouseras.

Answer: True LG: 1/LL: 1 Page: !1!

6-5. The nee& to manage change has become increasingl) important with theemphasis on global challenges an& opportunities.


6-+. Although &ownsiing has re&uce& the number of nonmanagerial "obs% it actuall)has increase& the nee& for mi&&le managers.

Answer: False LG: 1/LL: 1 Page: !1!

6-6. >or0ers are becoming better e&ucate& an& more self-&irecte&.


6-. <anagement is the art of getting things &one through organiational resources.


6-!!. The four 0e) management functions are planning% organiing% lea&ing% an&controlling.

Answer: True LG: !/LL: 1 Page: !1*-!1



6-!+.The management function that in,ol,es gui&ing% training% an& moti,ating others towor0 towar& the achie,ement of an organiation=s goals is calle& lea&ing.

Answer: True LG: !/LL: 1 Page: !1

6-!6. Planning is the function of management that in,ol,es anticipating future tren&san& &etermining the best strategies an& tactics to achie,e an organiation(s goalsan& ob"ecti,es.

Answer: True LG: !/LL: 1 Page: !1*

6-!. eth has spent the last two hours going o,er some consumer sur,e)s to see howwell her compan) is achie,ing its goal of impro,ing customer satisfaction. eth(sefforts are an eample of the controlling function of management.

Answer: True LG: !/LL: ! Page: !1

3ationale: ;ontrolling is the function concerne& with &etermining whether or notan organiation is progressing towar& achie,ing its goals an& ob"ecti,es.

6-*!. 3ita is a manager of a me&ium-sie& ser,ice compan). $he is currentl) in,ol,e&in re&esigning her &epartment to ensure that emplo)ees an& other resources canrespon& more 9uic0l) an& efficientl) to the nee&s of its customers. 3ita=s effortsare part of the organiing function of management.

Answer: True LG: !/LL: ! Page: !1*

3ationale: 'rganiing in,ol,es &esigning the structure of the organiation so thatresources can efficientl) achie,e the organiation=s ob"ecti,es. 'ne of the 0e)

ob"ecti,es to&a) is to fin& wa)s to organie businesses so that the) please thecustomer.

6-*. A ,ision is the o,erall eplanation of wh) an organiation eists an& where it istr)ing to hea&.

Answer: True LG: */LL: 1 Page: !15

6-*. A mission statement outlines the fun&amental purposes of an organiation.


6-5. $>'T anal)sis helps firms i&entif) both competiti,e threats an& mar0etopportunities.

Answer: True LG: */LL: 1 Page: !1+



6-6. Tactical planning &eals with setting long-range goals% while strategic planning&e,elops the specific strategies nee&e& to achie,e the organiation(s tacticalgoals.

Answer: False LG: */LL: 1 Page: !1+-!16

6-. $trategic planning &etermines the ma"or goals of the organiation.

Answer: True LG: */LL: 1 Page: !1+

6-51.;ontingenc) planning in,ol,es &e,eloping alternati,e courses of action to be use&if the primar) plans &o not achie,e the &esire& results.


6-+!. $>'T anal)sis focuses onl) on the internal acti,ities of the firm% while otheranal)tical tools are use& to re,iew the eternal en,ironment in which the firm

operates.

Answer: False LG: */LL: ! Page: !1+

3ationale: $>'T stan&s for strengths% wea0nesses% opportunities an& threats.>hile the strengths an& wea0nesses part of $>'T anal)sis focuses on internalaspects of the organiation% the opportunities an& threats part of $>'T loo0s atthe eternal en,ironment in which the organiation operates.

6-6!. An organiational chart shows who is accountable for the completion of specificwor0 an& who reports to whom.

Answer: True LG: /LL: 1 Page: !1

6-6+. $uper,isor) managers are those who &irectl) o,ersee the acti,ities of wor0ersan& e,aluate their &ail) performance.

Answer: True LG: /LL: 1 Page: !!

6-66. <i&&le managers usuall) are responsible for tactical planning an& controlling.


6-6. The ;4'% ;''% an& ;F' are all management positions that woul& be classifie&

as being part of top management.


6-6. 4n this &a) of rapi&l) changing technolog)% technical s0ills are the most importants0ills for all le,els of management.

Answer: False LG: /LL: 1 Page: !!1



6-5. The purpose of a cross-functional team is to train the members of a single&epartment to perform the functions of other &epartments.

Answer: False LG: /LL: 1 Page: !!1

6-+. 'ne result of the tren& towar& self-manage& teams is that more planning%

organiing an& controlling are being &elegate& to lower-le,el managers.

Answer: True LG: /LL: 1 Page: !!1

6.. An)one who is affecte& b) an organiation=s policies an& pro&ucts is consi&ere&to be a sta0ehol&er in that organiation.

Answer: True LG: /LL: 1 Page: !!!

6-1. A 0e) to ha,ing an effecti,e staffing polic) is to recruit people much li0e thepeople alrea&) wor0ing at the firm.

Answer: False LG: /LL: 1 Page: !!

6-1!+. The autocratic st)le of lea&ership can be ,er) effecti,e in emergenc) situations.

Answer: True LG: 5/LL: 1 Page: !!+

6-1!6. The traits use& b) autocratic lea&ers inclu&e warmth% frien&liness% an&un&erstan&ing.

Answer: False LG: 5/LL: 1 Page: !!+

6-1!. The traits that characterie participati,e lea&ers inclu&e fleibilit)% goo& listening

s0ills% an& empath).

Answer: True LG: 5/LL: 1 Page: !!+

6-1*. >hen businesses empower their emplo)ees% the role of a manager becomesless that of a boss an& more that of a coach% counselor% or team pla)er.

Answer: True LG: 5/LL: 1 Page: !!-!!

6-15+. 4n or&er to be effecti,e% performance stan&ar&s must be specific% attainable% an&measurable.

Answer: True LG: +/LL: 1 Page: !*1-!*!

6-156. Accounting an& finance are important for control s)stems because the) pro,i&ethe numbers management nee&s to e,aluate progress.

Answer: True LG: +/LL: 1 Page: !*!



6-15. Bternal customers are those in&i,i&uals or units that recei,e ser,ices from other units within the same organiation.

Answer: False LG: +/LL: 1 Page: !*!

6-1+. A corporate scorecar& is a broa& measurement tool that in&icates a compan)(sprogress towar& its final &estination-profits.

Answer: True LG: +/LL: 1 Page: !**

6-165. Accor&ing to well-0nown management consultant Peter ?ruc0er% managerspro,i&e:

A8 a &irection for their organiation an& lea&ership.8 technical 0now-how an& consistenc).;8 scientific anal)sis of &ata an& philosophical insights into fun&amental

9uestions.?8 rules an& regulations.

Answer: A LG: !/LL: 1 Page: !1*

6-16+. 'ne of the four primar) functions of management is: A8 controlling.8 mar0eting.;8 financing.?8 &esigning.

Answer: A LG: !/LL: 1 Page: !1

6.15. As a manager% two of $)l,ia=s strengths are her abilit) to communicate goals

clearl)% an& her abilit) to gui&e% coach% an& moti,ate wor0ers. ase& on thesestrengths% EEEEEEEE is a management function that $)l,ia is li0el) to be goo& atperforming.

A8 controlling8 planning;8 lea&ing?8 organiing

Answer: ; LG: !/LL: ! Page: !1

3ationale: Lea&ing in,ol,es communicating% gui&ing% training% coaching% an&moti,ating others to wor0 effecti,el) towar& achie,ing an organiation=s goals.



6-1+. Aman&a% a regional manager for Flairol ;osmetics% has "ust seen a reportshowing that sales in her region are lower than anticipate& so far this 9uarter. 2er net tas0 is to &etermine the reason for the &isappointing results an& fin& a wa)to get sales up to their &esire& le,el. Aman&a(s efforts are part of the

EEEEEEEEEEEE function of management.

A8 controlling8 &irecting;8 organiing?8 planning

Answer: A LG: !/LL: * Page: !1

3ationale: ;ontrolling in,ol,es chec0ing to &etermine whether goals an&ob"ecti,es are being met% an& ta0ing correcti,e action if the) are not.

6-1. >hich of the following acti,ities is part of the planning function of a managerK A8 Assigning a particular wor0er to &o a specific tas0.

8 Loo0ing at mar0et forecasts to i&entif) future business opportunities an&challenges.

;8 Praising a sales representati,e who has far ecee&e& her monthl) salesob"ecti,es.

?8 ;on&ucting a "ob inter,iew with a potential new emplo)ee.

Answer: LG: !/LL: * Page: !1*

3ationale: Planning in,ol,es anticipating tren&s% i&entif)ing opportunities an&challenges% an& &e,ising strategies an& tactics that will help the firm achie,e itsgoals an& ob"ecti,es.

6-1. >hich of the following acti,ities is part of the organiing function of a managerK A8 Going o,er a sprea&sheet to anal)e some financial &ata.8 Teaching a new emplo)ee how to use a piece of office e9uipment.;8 Gi,ing front-line wor0ers a&&itional resources nee&e& to pro,i&e faster an&

better ser,ice to customers.?8 ?e,eloping a broa& general strateg) to help the organiation meet its long-

term growth ob"ecti,es.

Answer: ; LG: !/LL: * Page: !1*

3ationale: 'rganiing inclu&es creating the con&itions an& s)stems in whiche,er)one an& e,er)thing wor0s together to achie,e an organiation=s ob"ecti,es.

<an) of to&a)=s organiations attempt to organie in wa)s that enable them toplease their customers at a profit.



6-!5!. Ael has "ust been promote& to a position in first-line management. Ael(s newposition probabl) will re9uire him to spen& a lot of time:

A8 &e,eloping strategic plans.8 e,aluating the &ail) performance of wor0ers.;8 creating a ,ision.?8 tra,eling to &ifferent wor0sites.

Answer: LG: /LL: * Page: !!

3ationale: First-line managers are responsible for assigning specific "obs towor0ers an& e,aluating the performance of emplo)ees on a &ail) basis.

CHAPTER 8

;hapter Test

-1.The &esign of a bureaucratic organiation assumes a well e&ucate& wor0force.

Answer: False LG: 1/LL: 1 Page: !*

-!.To better organie his business% Fran0 &i,i&es the re9uire& tas0s into smaller "obsan& assigns each "ob to a specific emplo)ee. This is an eample of&epartmentaliation.

Answer: False LG: 1/LL: ! Page: !

3ationale: ?i,i&ing tas0s into smaller "obs is calle& "ob specialiation.

?epartmentaliation refers to the process of setting up in&i,i&ual &epartments to&o specialie& tas0s.

-*.The &i,ision of labor an& specialiation often impro,es an emplo)ee=s "obperformance.

Answer: True LG: 1/LL: 1 Page: !

-.Bconomies of scale occur when a firm operates more efficientl) as it grows larger.

Answer: True LG: 1/LL: ! Page: !1

3ationale: Bconomies of scale is the concept that the bigger the firm% the moreefficient pro&uction becomes. This impro,e& efficienc) is the result of thespecialiation of labor an& purchasing raw materials in bul0.

-5.The &ri,ing force behin& the change in business organiations is the change inconsumer epectations.

Answer: True LG: 1/LL: 1 Page: !



-+.The &egree to which an organiation allows lower le,el managers to ma0e &ecisions&etermines the &egree of &ecentraliation.

Answer: True LG: !/LL: 1 Page: !5

-6. An organiational hierarch) establishes one person at the top of an organiation.

Answer: True LG: 1/LL: 1 Page: !*

-.The greater the rate of emplo)ee turno,er% the broa&er the span of control.

Answer: False LG: !/LL: 1 Page: !+

-.The flatter an organiation=s structure% the fewer managers are nee&e&.

Answer: True LG: !/LL: 1 Page: !

-1.4n a line organiation% there are man) specialists who ser,e as a&,isors an&assistants to the managers who ma0e &ecisions.

Answer: False LG: */LL: 1 Page: !51

-11.>hile staff personnel ha,e the authorit) to ma0e polic) &ecisions% line personnelha,e the authorit) to a&,ise an& ma0e suggestions.


-1!.;ross-functional teams are self-manage& groups of emplo)ees empowere& to wor0with suppliers an& customers to &e,elop new pro&ucts an& gi,e great ser,ice.


-1*. The &esign of a bureaucratic organiation assumes a well e&ucate& wor0force.

Answer: False LG: 1/LL: 1 Page: !*

-1.An organiation=s core competencies are those functions that the firm can performas well or better than an)one else in the worl&.


-15.3eengineering is inten&e& to impro,e the performance of an organiation through

regular% incremental steps.

Answer: False LG: 5/LL: 1 Page: !5



-1+. 3eengineering is the fun&amental rethin0ing an& ra&ical re&esign of organiationalprocesses in or&er to achie,e &ramatic impro,ements in performance.

Answer: True LG: 5/LL: 1 Page: !5

-16.A firm(s formal organiation woul& be better suite& than its informal organiation to: A8 create an atmosphere of frien&ship an& camara&erie among wor0ers.8 fin& answers to critical problems that re9uire logical anal)sis.;8 fin& creati,e solutions to short-term problems.?8 fin& a wa) aroun& bureaucratic rules an& regulations in or&er to get things

&one 9uic0l).

Answer: LG: 5/LL: ! Page: !+

-1.4n an in,erte& organiation% the "ob of management is to: A8 closel) monitor emplo)ee performance.8 establish rules an& regulations to gui&e wor0er beha,ior.

;8 ma0e all of the basic &ecisions.?8 assist an& support front-line people.

Answer: ? LG: 5/LL: ! Page: !5

3ationale: 4n an in,erte& organiation% the most important people are the front-line personnel who are in &irect contact with the customers. These emplo)eesare gi,en the fleibilit) an& &ecision ma0ing authorit) to meet the nee&s of thesecustomers. The "ob of management is to assist an& support these contactpeople% not boss them aroun&.

-1.Bcite Bnterprises uses an accounting firm to han&le the pa)roll an& ta functions

for the firm. #sing the ser,ices of another firm in this manner is an eample of: A8 outsourcing.8 functional reassignment.;8 core competencies.?8 benchmar0ing.

Answer: A LG: /LL: ! Page: !56

-!. As a new emplo)ee in a bureaucratic organiation% @anc) can epect a great&eal of in&epen&ence an& authorit).

Answer: False LG: 1/LL: ! Page: !*

3ationale: 4n a bureaucratic organiation% e,er)one is epecte& to follow specificrules. 'ne of the problems with this t)pe of organiation is that emplo)ees ha,elittle fleibilit) to respon& to customer wants an& nee&s.

-!1. ;entralie& authorit) pro,i&es for the &elegation of authorit) to emplo)ees whoare then better able to respon& to customers( nee&s.

Answer: False LG: !/LL: 1 Page: !5



-!!. ?epartmentaliation creates an en,ironment in which people are traine& in a,ariet) of managerial responsibilities.

Answer: False LG: !/LL: 1 Page: !

-!*. 3ome ;orporation is organie& into &epartments such as finance% pro&uction%mar0eting% &ata processing% an& accounting. 3ome has chosen to&epartmentalie b) function.

Answer: True LG: !/LL: ! Page: !

3ationale: ?epartmentaliation b) function means to group wor0ers into&epartments base& on similar s0ills% epertise% an& resources.

-!.Line managers issue or&ers% enforce &iscipline% an& a&"ust the organiation ascon&itions change.


-!5.4n large businesses% a line organiation pro,i&es firms the abilit) to respon& 9uic0l)to a changing en,ironment.


-!+.Line organiations clearl) &efine the lines of authorit) an& responsibilit).


-!6.<atri organiations bring together specialists from &ifferent parts of the firm to

wor0 on specific pro"ects.

Answer: True LG: */LL: 1 Page: !5!

-!.The team specialists in a matri organiation remain part of the tra&itional line an&staff structure.

Answer: True LG: */LL: 1 Page: !5!

-!.A matri organiation pro&uces an en,ironment that &iscourages cooperation an&teamwor0.

Answer: False LG: */LL: 1 Page: !5!

-*.;ross-functional teams are self-manage& groups of emplo)ees empowere& to wor0with suppliers an& customers to &e,elop new pro&ucts an& gi,e great ser,ice.




-*1.;ross-functional teams ser,e as a&,isor) committees offering their epertise to line&ecision ma0ers.


-*!.@etwor0ing uses communication technolog) to lin0 organiations allowing them towor0 together on common ob"ecti,es.


-**.The 4nternet ma0es real time a,ailabilit) of &ata possible.


-*.Transparenc) &escribes the relationship between a firm an& its stoc0hol&ers.

Answer: False LG: /LL: 1 Page: !55

-*5.Transparenc) allows two companies to wor0 more efficientl) together.


-*+.enchmar0ing re9uires organiations to compare each function against the best inthe worl&.

Answer: True LG: /LL: 1 Page: !5+

-*6.;ompetiti,e benchmar0ing rates an organiation=s pro&ucts an& operations againstthe in&ustr) a,erage.

Answer: False LG: /LL: 1 Page: !5+

-*.;ompetiti,e benchmar0ing compares a compan)(s practices% processes% an&pro&ucts against the worl&=s best.

Answer: True LG: /LL: 1 Page: !5+

-*.3estructuring in,ol,es relati,el) minor changes to an organiation to better meet

the nee&s of management.


-.4n,erte& organiations empower emplo)ees b) a&&ing multiple la)ers ofmanagement an& long lines of communication.




-1.4n an in,erte& organiation% the purpose of management is to assist an& supportfirst-line emplo)ees% not boss them aroun&.

Answer: True LG: 5/LL: 1 Page: !5

-!.A firm=s informal organiation refers to the structure that i&entifies the authorit)%

responsibilit)% an& position of people within the organiation.

Answer: False LG: 5/LL: 1 Page: !+

-*.The informal organiation of a business can help generate creati,e solutions toshort-term problems.

Answer: True LG: 5/LL: 1 Page: !+

-.The formal organiation of a firm pro,i&es the lines of authorit) to follow in routinesituations.

Answer: True LG: 5/LL: 1 Page: !+

-5.'rganiing a business begins with: A8 ac9uiring the necessar) resources.8 choosing the best 9ualifie& emplo)ees.;8 &e,eloping an efficient plan of action.?8 &etermining the wor0 to be &one.

Answer: ? LG: 1/LL: 1 Page: !

-+.?i,i&ing the re9uire& wor0 among a group of emplo)ees is calle& a: A8 &epartmentaliation.

8 &elegation of responsibilit).;8 &i,ision of labor.?8 separation of control.

Answer: ; LG: 1/LL: 1 Page: !

-6.?i,i&ing tas0s into smaller "obs is calle&: A8 "ob enrichment.8 "ob specialiation.;8 &epartmentaliation.?8 &i,ision of authorit).

Answer: LG: 1/LL: 1 Page: !

-.The process of setting up in&i,i&ual &epartments to &o specialie& tas0s is calle&: A8 &epartmentaliation.8 a &i,ision of labor.;8 "ob specialiation.?8 &elegation of authorit).

Answer: A LG: 1/LL: 1 Page: !



-.4n a bureaucratic organiation: A8 &epartments communicate with each other on a regular basis.8 emplo)ees follow strict rules an& regulations.;8 customer satisfaction is the number one priorit).?8 the first-line wor0ers are empowere& to respon& to the nee&s of customers.

Answer: LG: 1/LL: 1 Page: !*

-5.'ne a&,antage of a bureaucratic organiation is that: A8 it is ,er) responsi,e to the wants an& nee&s of customers.8 there are ,er) few la)ers of management.;8 it encourages cooperation among &ifferent &epartments within the

organiation.?8 emplo)ees 0now what is epecte& of them.

Answer: ? LG: 1/LL: 1 Page: !*

chapters 5 thru 8 for study

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