ETS Major Field Test (Answered Test): Bachelor's Degree in Business.

The common characteristic possessed by all assets is

a) Long life
b) Great monetary value
c) Tangible nature
d) Future economic benefit
d) Future economic benefit

Which Foreign Direct Investment (FDI) attempts to acquire particular resources at a lower real cost than could be obtained in the home country?

a) Market-seeking FDI
b) Efficiency-seeking FDI
c) Resource-seeking FDI
d) Strategic asset-seeking FDI
c) Resource-seeking FDI

Under the Uniform Commercial Code (UCC) statute of frauds, which of the following terms must be included in writing in order to satisfy the writing requirement?

a) The price of the goods.
b) The quantity of the goods.
c) The signatures and names of the buyer and the seller
d) The time and place for delivery
b) The quantity of the goods

Which of the following is an appropriate Federal Reserve action to stimulate the United States economy?

a) Selling government bonds on the open market
b) Increasing the discount rate
c) Reducing the reserve requirement
d) Cutting taxes
c) Reducing the reserve requirement

Which of the following is true with regard to an exculpatory clause?

a) An exculpatory clause excuses one party from liability for his/her own tortious conduct.

b) Where one party has a superior bargaining position that has enabled him/her to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision.

c) An exculpatory clause may be unenforceable for unconscionability.

d) All of the above are true
d) All of the above are true

Managers at ABC, Inc. analyze the current situation of their organization and then develop plans to help their organization to accomplish its mission and achieve its goals. This is known as:

a) Synergy planning
b) Strategy formulation
c) Functional planning
d) SWOT analysis
b) Strategy formulation

A group that develops naturally as a result of employees’ interaction within an organization is referred to as

a) an informal group
b) a formal group
c) a work-team group
d) a formation group
a) an informal group

When employees use email, word processors, electronic scheduling / calendars, they are using which of the following?

a) Transaction processing systems
b) Process control systems
c) Office automation systems
d) Decision support systems
c) Office automation systems

A standard procedure for numerically measuring a project’s progress, forecasting its completion date and cost and providing measures of schedule and budget variation as activities are completed is referred to as

a) program evaluation and review technique (PERT)
b) the critical path method (CPM)
c) a Gantt chart
d) earned value analysis (EVA)
d) earned value analysis (EVA)

High product differentiation is generally accompanied by

a) higher market share
b) decreased emphasis on competition based on price
c) higher profit margins and lower costs
d) significant economies of scale
b) decreased emphasis on competition based on price

The essence of common law is:

a) its prospective nature.
b) the concept of stare decisis
c) its flexibility
d) the plain meaning doctrine
b) the concept of stare decisis

The Organization of the Petroleum Exporting Countries (OPEC) reduces production by
10 percent, and the growth rate of the world economy begins to escalate. How will the
simultaneous occurrence of these events affect the equilibrium price and quantity in the world
petroleum market?

a) Price will increase, but quantity will remain unchanged
b) Price will increase, but quantity is indeterminate
c) Quantity will increase, but price is indeterminate
d) Both price and quantity will increase
b) Price will increase, but quantity is indeterminate

Within the context of the capital asset pricing model (CAPM), the risk measure known as beta is often computed by regressing the return of the company’s stock against the

a) return on the company’s bonds
b) return on the market portfolio
c) change in the gross domestic product
d) change in the consumer price index
b) return on the market portfolio

If the spread between the spot and forward exchange rates of two currencies equals the interest rate difference between the two countries, this phenomenon is referred to as

a) purchasing-power equality
b) commodity arbitrage
c) currency hedging
d) interest-rate parity
d) interest-rate parity

Douglass Interiors is considering two mutually exclusive projects and have determined that the crossover rate for these projects is 11.7 percent. Project A has an internal rate of return (IRR) of 15.3 percent and Project B has an IRR of 16.5 percent. Given this information, which one of the following statements is correct?

a) Project A should be accepted as its IRR is closer to the crossover point than is Project B’s IRR.

b) Project B should be accepted as it has the higher IRR.

c) Both projects should be accepted as both of the project’s IRRs exceed the crossover rate.

d) Neither project should be accepted since both of the project’s IRRs exceed the crossover rate.

e) You cannot determine which project should be accepted given the information provided.
e) You cannot determine which project should be accepted given the information provided.

A small number of people with complementary skills who are committed to a common purpose, a set of performance goals, and an approach for which they hold themselves mutually accountable is referred to as a

a) committee
b) task force
c) group
d) team
d) team

Manufacturing overhead includes:

a) all direct material, direct labor and administrative costs

b) all manufacturing costs except direct labor

c) all manufacturing costs except direct labor and direct materials

d) all selling and administrative costs
c) all manufacturing costs except direct labor and direct materials

Sue and Neal are twins. Sue invests $5,000 at 7 percent when she is 25 years old. Neal invests $5,000 at 7 percent when he is 30 years old. Both investments compound interest annually. Both Sue and Neal retire at age 60. Which one of the following statements is correct assuming that neither Sue nor Neal has withdrawn any money from their accounts?

a) Sue will have less money when she retires than Neal.

b) Neal will earn more interest on interest than Sue.

c) Neal will earn more compound interest than Sue.

d) If both Sue and Neal wait to age 70 to retire, then they will have equal amounts of savings.

e) Sue will have more money than Neal as long as they retire at the same time
e) Sue will have more money than Neal as long as they retire at the same time

A sample of assistant professors on the business faculty at state supported institutions in Ohio revealed the mean income to be $32,000 for 9 months with a standard deviation of $3,000. Using Chebyshev’s Theorem, what proportion of the faculty earns more than $26,000 but less than $38,000?

a) At least 50%
b) At least 25%
c) At least 75%
d) At least 100%
c) At least 75%

When a domestic firm permits a foreign company to manufacture and sell its product in exchange for a fee or royalty, the process is termed

a) importing
b) exporting
c) licensing
d) countertrading
c) licensing

In project management the term slack refers to the:

a) amount of time to complete an activity without delaying the project

b) amount of time an activity can be delayed without delaying the project

c) amount of time needed to complete the entire project

d) amount of time required to complete the project’s critical activities
b) amount of time an activity can be delayed without delaying the project

In the calculation of the arithmetic mean for grouped data, which value is used to represent all the values in a particular class?

a) The upper limit of the class
b) The lower limit of the class
c) The frequency of the class
d) The cumulative frequency preceding the class
e) The class midpoint
e) The class midpoint

Which of the following statements about the tort of negligence is true?

a) It cannot be used as a basis for liability for defective products.

b) It is a strict liability tort with no defenses.

c) It requires proof of some intentional conduct.

d) It requires proof of breach of a statutory or common-law duty.
d) It requires proof of breach of a statutory or common-law duty.

Long-term plans focusing on those organizational objectives that will significantly affect the firm for five or more years are usually referred to as _ plans.

a) strategic
b) marketing
c) economic
d) Tactical
a) strategic

The CEO reviews the performance of her company in the past month’s Profit & Loss Statement to determine if the company is “on track” in terms of its sales and profitability goals. This CEO is engaged in which function?

a) Planning
b) Organizing
c) Demonstrating
d) Controlling
e) Leading
d) Controlling

The longest path through the network, in terms of time, is referred to as the

a) activity-on-node path
b) path of greatest slack
c) critical path
d) scheduling path
c) critical path

In an economy the unemployment rate is 10 percent and the inflation rate is 1 percent. An
appropriate fiscal policy in this phase of the business cycle would be to

a) increase government spending
b) increase income taxes
c) decrease transfer payments
d) decrease the money supply
a) increase government spending

In _, provincial governments play a substantial role in trade and investment regulation

a) China
b) Norway
c) Indonesia
d) Canada
d) Canada

Web 2.0 is best represented by which of the following phenomena?

a) Social networking sites
b) Word processing
c) Internet browsers
d) Text messaging
a) Social networking sites

Business torts consist of:

a) interference with contractual relations.
b) disparagement.
c) fraudulent misrepresentation
d) All of the above
d) All of the above

Officers and directors of a corporation owe to the corporation the subordination of their self-interest to the interest of the corporation and owe constant loyalty to the corporation. This duty is the:

a) fiduciary duty
b) business judgment duty
c) duty of indemnification
d) duty of diligence
a) fiduciary duty

Which of the following is not part of the accounting process?

a) Recording
b) Identifying
c) Financial decision making
d) Communicating
c) Financial decision making

In organizational decision making, managers are able to exercise the greatest degree of discretion in the

a) enforcement of internal policies
b) settlement of legal disputes
c) restructuring of outstanding loans
d) compliance with federal regulations.
a) enforcement of internal policies

Money is the key motivator in

a) Herzberg’s motivation-hygiene theory
b) Maslow’s hierarchy of needs
c) McGregor’s Theory X and Theory Y
d) Taylor’s scientific management
d) Taylor’s scientific management

The incomes of a group of 50 loan applicants are obtained. Which level of measurement is income?

a) Nominal
b) Ordinal
c) Interval
d) Ratio
e) None of the above
d) Ratio

Saint Martin Hospital boasts one of the world’s leading medical imaging programs. Its radiology department specializes in the early detection of particularly serious forms of stomach, intestinal, and colon cancer. The hospital plans to invest in a new system of digital medical imaging and image transmission technologies that will enable its radiologists to view and evaluate intestinal scan results from anywhere in the world.

With this investment, the hospital is attempting to overcome which of the constraints of services
marketing?

a) Inventory
b) Intangibility
c) Inconsistency
d) Inseparability
d) Inseparability

The probability that a product will operate properly within an expected time frame is the dimension of quality known as

a) durability
b) reliability
c) performance
d) serviceability
b) reliability

The organizational buying process has more steps than the consumer buying process, which can be attributed to:

a) the limited number of suppliers in the B2B marketplace

b) the importance of integrating the responsibilities of the wholesalers or retailers

c) interpersonal and environmental influences not seen in consumer buying decisions

d) business purchasing that introduces new complexities that do not affect consumers
d) business purchasing that introduces new complexities that do not affect consumers

If the Federal Reserve decides to decrease the money supply, which of the following most likely will occur?

a) An increase in private investment and consumer expenditure

b) A decrease in private investment and consumer expenditure

c) An increase in private investment and a decrease in consumer expenditure

d) A decrease in private investment and an increase in consumer expenditure
b) A decrease in private investment and consumer expenditure

Which of the following is an assumption of Theory Y as developed by Douglas McGregor?

a) Workers seek responsibility
b) Workers dislike work
c) Workers prefer direction
d) Workers are interested in monetary gains
a) Workers seek responsibility

Natural Monopolies are characterized by…

a) Economies of Scale (Increasing returns to scale)
b) Constant Returns to Scale
c) Diseconomies of Scale (Decreasing returns to scale)
d) Non-existent returns to Scale
a) Economies of Scale (Increasing returns to scale)

A firm that would like to know whether it has enough cash to meet its bills would be most likely to use which category of financial ratio?

a) Liquidity
b) Leverage
c) Efficiency
d) Profitability
a) Liquidity

The economic entity assumption requires that the activities

a) of different entities can be combined if all the entities are corporations

b) must be reported to the Securities and Exchange Commission

c) of a sole proprietorship cannot be distinguished from the personal economic events of its owners

d) of an entity be kept separate from the activities of its owner
d) of an entity be kept separate from the activities of its owner

Firms engage in international operations because they can benefit from:

a) Cheap labor, cheap resources, and fair market opportunities

b) Competitive labor prices, cheap resources, and enormous market opportunities

c) Lax government regulation, low taxes, and few laws

d) Unsophisticated employees and customers, eager learners, and a few consumer goods
b) Competitive labor prices, cheap resources, and enormous market opportunities

What is the unemployment rate?

a) the percentage of the Labor Force that is unemployed

b) the percentage of the Adult Population that is unemployed

c) the percentage of the Adult Population that is not in the Labor Force

d) all of the above
a) the percentage of the Labor Force that is unemployed

A standard marketing strategy that is modified only minimally for use in each of the firm’s foreign markets is a _ marketing strategy.

a) lateral entry
b) unipolar
c) global
d) multidomestic
c) global

Markets for resources (factors of production) are different from goods markets because…

a) There is always market power

b) Resources are not consumed themselves, but are means to the production of some other good

c) Resources are vague, undefined concepts

d) Resources are supplied by firms not households
b) Resources are not consumed themselves, but are means to the production of some other good

Standard deviation measures which type of risk?

a) total
b) nondiversifiable
c) unsystematic
d) systematic
e) economic
a) total

Information systems are either operations or management systems. Which one of the following would NOT be classified as an operations system?

a) Transaction processing systems
b) Process control systems
c) Functional information systems
d) Executive support systems
d) Executive support systems

In monopolistic competition, there are:

a) Many firms selling identical products

b) Many firms selling similar, but not identical products

c) A few firms selling similar, but not identical products

d) A few firms selling unique products with no close substitutes
b) Many firms selling similar, but not identical products

An open access good (or common property good), such as a fishery:

a) Is rival but not excludable
b) Is both rival and excludable
c) Is neither rival nor excludable
d) Is not rival but is excludable
a) Is rival but not excludable

In service blueprinting, which line separates front office activities from back office activities?

a) Line of visibility
b) Line of intervention
c) Line of influence
d) Line of support
a) Line of visibility

You are viewing a graph that plots the NPVs of a project to various discount rates that could be applied to the project’s cash flows. What is the name given to this graph?

a) project tract
b) projected risk profile
c) NPV profile
d) NPV route
e) present value sequence
c) NPV profile

Most Japanese MNE’s, for instance, begin their international expansion with _ investment because they believe that it enables the sharing of experience, resources, and knowledge already developed at home, thus reducing risk.

a) Vertical FDI
b) Horizontal FDI
c) Conglomerate FDI
d) None of the above
b) Horizontal FDI

Routine physical examinations are conducted annually as part of a health service program for the employees. It was discovered that 8% of the employees needed corrective shoes, 15% needed major dental work and 3% needed both corrective shoes and major dental work. What is the probability that an employee selected at random will need either corrective shoes or major dental work?

a) 0.20
b) 0.25
c) 0.50
d) 1.00
e) None of the above
a) 0.20

Assume that $1 is equal to ¥102.32 and also equal to C$1.0958. Based on this, you could say that C$1 is equal to: C$1(¥102.32 / C$1.0958) = ¥93.37. The exchange rate of C$1 = ¥93.37 is referred to as the:

A) Cross-rate
B) Interest rate
C) Forward rate
D) Open exchange rate
E) Backward rate
A) Cross-rate

There are 10 rolls of film in a box and 3 are defective. Two rolls are to be selected without replacement. What is the probability of selecting a defective roll followed by another defective roll?

a) 1/2, or 0.50
b) 1/4, or 0.25
c) 1/120, or about 0.0083
d) 1/15, or about 0.07
d) 1/15, or about 0.07

Maxwell has been named to an upper-level management position at QVC. He will be working with transportation media, order processing, and development of marketing channels. Maxwell is involved in developing _ strategies.

a) product
b) distribution
c) promotional
d) marketing
b) distribution

Kershaw Bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:

Date Purchases Sales
Jan 14 375 @ $28
Jan 17 250 @ $20
Jan 25 250 @ $22
Jan 29 250 @ $32

Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units were on hand at January 31.

The cost of the inventory at January 31, under the LIFO method is:

a) $1,000
b) $6,750
c) $7,750
d) $8,000
b) $6,750

The term “net working capital” refers to

a) inventories, receivables, and current notes and investments

b) assets divided by liabilities

c) current assets less short-term liabilities

d) net assets left over after subtracting cost of goods sold
c) current assets less short-term liabilities

Marketers must constantly monitor their competitors’ products, prices, distribution, and promotional efforts because the:

a) competitors may be violating the truth-in-advertising laws

b) actions of competitors may threaten the firm’s monopoly position

c) actions of competitors may create an oligopoly within an industry

d) new product offerings by a competitor may require adjustments to one or more components of the firm’s marketing mix
d) new product offerings by a competitor may require adjustments to one or more components of the firm’s marketing mix

The General Agreement on Tariffs and Trade (GATT) created the World Trade Organization (WTO). The WTO activities include:

a) stimulating international commerce and resolving trade disputes.

b) enforcement of the Foreign Corrupt Practices Act (FCPA).

c) elimination of almost all trade barriers between Canada, Mexico, and the United States.

d) All the above are correct
a) stimulating international commerce and resolving trade disputes.

A project has a net present value of zero. Which one of the following best describes this project?

a) The project has a zero percent rate of return.

b) The project requires no initial cash investment.

c) The project has no cash flows.

d) The summation of all of the project’s cash flows is zero.

e) The project’s cash inflows equal its cash outflows in current dollar terms
e) The project’s cash inflows equal its cash outflows in current dollar terms

M-commerce:

a) Involves buying, selling, marketing and servicing of products, services and information over variety of networks

b) Uses commercial processes like multimedia advertising, product information and customer support on the Web

c) Involves Internet security and payment mechanisms that ensure completion of delivery and payment processes

d) All of the choices are correct
d) All of the choices are correct

Abraham Maslow, noted psychologist, theorized that people were motivated by:

a) money, more money, and even more money
b) time pressures
c) unmet needs
d) greed
c) unmet needs

A legal institution associated with an independent judiciary relying on case precedents is called

a) common law system
b) civil law system
c) theocratic law system
d) None of the above
a) common law system

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy?

a) differentiation
b) overall cost leadership
c) differentiation focus
d) stuck-in-the-middle
b) overall cost leadership

The central processing unit (CPU) in a personal computer contains the

a) control unit and primary memory
b) control unit and arithmetic/logic unit
c) arithmetic/logic unit and bus
d) arithmetic/logic unit only
b) control unit and arithmetic/logic unit

__ planning normally is performed by middle managers and typically has a one-year time frame

a) Strategic planning
b) Tactical planning
c) Operational planning
d) Contingency planning
b) Tactical planning

A problem associated with equity theory is that:

a) it focuses on providing incentives for the long run when most workers are mainly concerned with incentives that apply to their current situation

b) managers have a hard time applying it to real-world situations because of its abstract nature

c) worker motivation is based on perceptions of fairness, and the perceptions workers have about their contributions are not always accurate

d) it is concerned with the nature of the job itself rather than with what motivates the workers who perform the job
c) worker motivation is based on perceptions of fairness, and the perceptions workers have about their contributions are not always accurate

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

From data collected by the retail jewelers’ trade association, Ms. Thornton learns that sales of antique jewelry are rising and that the most common purchasers are older, upper-income couples. Though initially reluctant to purchase online, these customers are beginning to overcome their concerns. From United States Census Bureau data, she learns that this population segment is growing in number and will continue to do so throughout the next two decades. At this point what should Ms. Thornton do?

a) Summarize the research findings and recommend implementing the online catalog as the firm’s market is clearly growing.

b) Collect primary data to determine whether these trends and preferences are reflected in
Priceless Treasures’ customer base.

c) Collect primary data on competitors to determine whether the online market for antique jewelry is saturated.

d) End the study and retain the current system as the major customer segment is clearly skeptical of online retailers.
b) Collect primary data to determine whether these trends and preferences are reflected in
Priceless Treasures’ customer base.

Zach, a high school junior, has just moved to a new town and cannot wait to get to school to meet new people. He likes sports and hopes he can try out for the soccer team. According to Maslow, Zach is working to fulfill his _ needs:

a) social
b) esteem
c) self-actualization
d) Safety
a) social

A student received an A on the first test of the semester. The student wants to calculate the probability of scoring an A on the second test. Historically, the instructor knows that the joint probability of scoring A’s on the first two tests is 0.5. Also, historically, the probability that a student scores and “A” on the second test given that a student scored an A on the first test is 0.9. What is the probability that a student will score an A on the second test?

a) 0.50
b) 0.95
c) 0.55
d) 0.90
c) 0.55

A project consists of 150 jobs. The expected completion time for each job is given in days. The project has three critical paths with two jobs in common, J and K. In order to finish the project one day early, the completion time should be reduced one day for

a) each of the 150 jobs
b) each of the jobs on the three critical paths
c) either Job J or Job K
d) both Job J and Job K
c) either Job J or Job K

A company had sales of $920,000 and fixed costs were $160,000. What was the income from operations if the contribution margin ratio was 30 percent?

a) $116,000
b) $276,000
c) $484,000
d) $644,000
a) $116,000

A system whereby products are delivered to warehouses on a continual basis, where they are sorted, repackaged and distributed to stores without sitting in inventory is known as

a) postponement
b) cross-docking
c) continuous replenishment
d) direct-response delivery
b) cross-docking

The primary purpose of the statement of cash flows is to report

a) A company’s investing transactions

b) A company’s financing transactions

c) Information about cash receipts and cash payments of a company

d) The net increase or decrease in cash
c) Information about cash receipts and cash payments of a company

According to Trompenaar and Hampden-Turners classification, a culture with private life kept separate from work is called:

a) Diffuse
b) Specific
c) Neutral
d) Emotional
b) Specific

In a negligence case, the plaintiff must establish:

a) duty, strict liability, causation, and injury

b) mens rea, breach, foreseeable harm, and injury.

c) duty, actus reus, foreseeable harm, and causation.

d) duty of due care, breach, causation, foreseeable harm, and injury
a) duty, strict liability, causation, and injury

Under the common law, the _ must be the mirror image of the _

a) contract, consideration.
b) contract, offer
c) offer, acceptance
d) acceptance, offer
d) acceptance, offer

The matching principle matches

a) customers with businesses
b) expenses with revenues
c) assets with liabilities
d) creditors with businesses
b) expenses with revenues

In a period of rising prices, which inventory valuation method would generally yield both the
lowest ending inventory value and the lowest net income figure?

a) First in, first out (FIFO)
b) Last in, first out (LIFO)
c) Weighted average
d) Standard cost
b) Last in, first out (LIFO)

General Bikes is debating which marketing research options to employ. The traditional person-to-person methods have been effective; however, the new director of market research is campaigning for online-based research. What argument for this method might he/she use?

a) Consumers are more relaxed at home in front of their computers, therefore it is more likely the responses will be truthful

b) Online research has been standardized for each industry, making it easier to understand them

c) A well-designed, Internet-based marketing research project can cost less and yield information faster than offline research

d) Person-to-person methods most often incorporate researcher bias into the surveys and observations
c) A well-designed, Internet-based marketing research project can cost less and yield information faster than offline research

Which one of the following statements does NOT apply to the concept of an information system model?

a) An information system transforms data into input

b) An information system transforms information into data

c) An information system transforms information into output

d) An information system transforms input into information
d) An information system transforms input into information

A manager who chooses the wrong goals for the organization and makes poor use of the organization’s resources in pursuing these goals is said to have:

a) Low effectiveness/low efficiency
b) Low effectiveness/high efficiency
c) High effectiveness/low efficiency
d) High effectiveness/high efficiency
e) None of the above
a) Low effectiveness/low efficiency

What can we conclude if the coefficient of determination is 0.94?

a) Strength of relationship is 0.94

b) Direction of relationship is positive

c) 94% of total variation of one variable is explained by variation in the other variable

d) All of the above are correct
c) 94% of total variation of one variable is explained by variation in the other variable

A valid contract may be unenforceable for which reason(s)?

a) Failure to satisfy the Statute of Frauds.
b) Running of the Statute of Limitations
c) Both (A) and (B)
d) A valid contract is always enforceable.
c) Both (A) and (B)

As the size of the sample increases, what happens to the shape of the sampling means?

a) Cannot be predicted in advance
b) Approaches a normal distribution
c) Positively skewed
d) Negatively skewed
b) Approaches a normal distribution

A differentiation strategy enables a business to address the five competitive forces by

a) lessening competitive rivalry by distinguishing itself

b) having brand-loyal customers become more sensitive to prices

c) increasing economies of scale

d) serving a broader market segment
a) lessening competitive rivalry by distinguishing itself

In a large firm, the pool of applicants for the positions of sales manager and sales associate consists of three men and three women. If each candidate has an equal chance of being selected, what is the probability that both positions will be filled by men?

a) 0.20
b) 0.25
c) 0.33
d) 0.50
a) 0.20

Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a percentage of total product cost and where there is __ diversity among the various products that they produce.

a) low, little
b) low, considerable
c) high, little
d) high, considerable
d) high, considerable

Economists assume a firm’s goal is to:

a) Minimize total costs
b) Maximize total revenue
c) Maximize profits
d) All of the Above
c) Maximize profits

What is the measure that indicates how precise a prediction of Y is based on X or, conversely, how inaccurate the prediction might be?

a) Regression equation
b) Slope of the line
c) Standard error of estimate
d) Least squares principle
c) Standard error of estimate

The principal difference between variable costing and absorption costing centers on:

a) whether variable manufacturing costs should be included as product costs

b) whether fixed manufacturing costs should be included as product costs

c) whether fixed manufacturing costs and fixed selling and administrative costs should be included as product costs

d) none of these
b) whether fixed manufacturing costs should be included as product costs

You want to have $1 million in your savings account when you retire. You plan on investing a single lump sum today to fund this goal. You are planning on investing in an account which will pay 7.5 percent annual interest. Which of the following will reduce the amount that you must deposit today if you are to have your desired $1 million on the day you retire?

I. Invest in a different account paying a higher rate of interest.
II. Invest in a different account paying a lower rate of interest.
III. Retire later.
IV. Retire sooner.

a) I only
b) II only
c) I and III only
d) I and IV only
e) II and III only
c) I and III only

Miller Brothers Hardware paid an annual dividend of $1.15 per share last month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 12 percent rate of return, how much are you willing to pay to purchase one share of this stock today?

a) $12.23
b) $12.55
c) $12.67
d) $12.72
b) $12.55

What is the median of 26, 30, 24, 32, 32, 31, 27 and 29?

a) 32
b) 29
c) 30
d) 29.5
e) 30.5
d) 29.5

An information system that enables all business departments in the same firm to share relevant information and data is called

a) an enterprise resource planning (ERP) system
b) a material requirements planning (MRP) system
c) a decision support system (DSS)
d) a point-of-sale (POS) system
a) an enterprise resource planning (ERP) system

In marketing research, a firm might consider using secondary data over primary data because

a) secondary data usually cost less
b) secondary data are usually more accurate
c) primary data are usually non specific
d) primary data are likely to be outdated.
a) secondary data usually cost less

Which of the following is not one of the four primary functional areas of a firm?

a) human resources
b) legal
c) marketing
d) operations
b) legal

U.S. dollars deposited in a bank in Switzerland are called:

a) foreign depository receipts
b) international exchange certificates
c) francs
d) Eurocurrency
e) Eurodollars
d) Eurocurrency

Fiedler proposes that all of the following determine whether a task- or relationship-oriented style is more effective except:

a) Situational favorableness
b) Leader-member relations
c) Task structure
d) Position power
a) Situational favorableness

The effect whereby slight demand variability is magnified as it moves back upstream in the supply chain is known as

a) the bullwhip effect
b) postponement
c) collaborative replenishment
d) direct-response delivery
a) the bullwhip effect

By assembling computers only after customers have paid them for, resulting in a lower finished goods inventory, Dell Computer Co. achieved:

a) Increased quality
b) A competitive advantage
c) Increased responsiveness
d) Increased innovation
e) None of the above
b) A competitive advantage

A manufacturer estimates its factory overhead costs to be $30,000 and machine hours to be 4,000 for the year. If the actual hours worked on production total 3,800 and the actual factory overhead costs are $28,000, what is the amount of the over- or underapplied factory overhead?

a) $500 overapplied
b) $500 underapplied
c) $2,000 overapplied
d) $2,000 underapplied
a) $500 overapplied

In the late 1970’s and 1980’s, the U.S. car manufactures sought to limit __ import to the U.S.?

a) Cuban
b) Asian
c) Japanese
d) Chinese
c) Japanese

Based on his scientific management theory, Frederick Taylor developed what pay principle?

a) Hourly pay
b) Incentive pay
c) Profit sharing
d) Monthly salary with bonus
b) Incentive pay

Sessler Manufacturers made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.75 a share. Secondly, all dividends after that will decrease by 1.5 percent annually. What is the maximum amount you should pay to purchase a share of this stock today if you require a 14 percent rate of return?

a) $11.29
b) $12.64
c) $13.27
d) $14.00
e) $14.21
a) $11.29

In general, as the order size increases,

a) ordering costs decrease and carrying costs increase

b) ordering costs increase and carrying costs decrease

c) both ordering and carrying costs increase

d) both ordering and carrying costs decrease
a) ordering costs decrease and carrying costs increase

Generally, as the number of servers in a waiting line system increases

a) service cost increases and waiting cost decreases
b) service cost decreases and waiting cost increases
c) both service cost and waiting cost increase
d) both service cost and waiting cost decrease
a) service cost increases and waiting cost decreases

The document that provides a common understanding, justification, and expected result for a project is referred to as

a) the statement of work (SOW)
b) the work breakdown structure (WBS)
c) the scope statement
d) the responsibility assignment matrix (RAM)
c) the scope statement

A company issued a $600,000, 12 percent, 90-day note payable to acquire an office building. What is
the maturity value of the note?

a) $72,000
b) $600,000
c) $618,000
d) $672,000
c) $618,000

The process of collecting information about the external marketing environment is called:

a) environmental management
b) marketing research
c) marketing management
d) environmental scanning
d) environmental scanning

A nuclear power plant uses electronic sensors linked to computers to continually monitor processes and make instant (real-time) adjustments that control the power generation process. This is an example of a(n):

a) Transaction processing system
b) Decision support system
c) Enterprise collaboration system
d) Process control system
d) Process control system

Which one of the following is NOT a major dimension of global IT cultural, political and geo-economic challenges?

a) Global business and IT strategies
b) Global business and IT application portfolios
c) Global IT platforms
d) Global software management
d) Global software management

Net income $100,000

Depreciation expense $10,000

Net increase in accounts receivable $5,000

Net increase in accounts payable $3,000

On the basis of the information provided in the table above for a corporation, the corporation’s net cash flow from operating activities for the current year is

a) $98,000
b) $102,000
c) $108,000
d) $118,000
c) $108,000

Which of the following statements is NOT correct concerning the Cash Budget?

a) It is not necessary to prepare any other budgets before preparing the Cash Budget

b) The Cash Budget should be prepared before the Budgeted Income Statement

c) The Cash Budget should be prepared before the Budgeted Balance Sheet

d) The Cash Budget builds on earlier budgets and schedules as well as additional data
a) It is not necessary to prepare any other budgets before preparing the Cash Budget

You are investing $100 today in a savings account at your local bank. Which one of the following terms refers to the value of this investment one year from now?

a) future value
b) present value
c) principal amounts
d) discounted value
e) invested principal
a) future value

Which of the following consists of factors that influence consumer buying power and marketing strategies?

a) competitive environment
b) cultural environment
c) economic environment
d) regulatory environment
c) economic environment

Steel, paper, paints, and chemicals are examples of industries that most likely use

a) batch production systems
b) repetitive production systems
c) continuous production systems
d) mass production systems
c) continuous production systems

A company is considering producing a product for a new market. The fixed costs required for manufacturing and delivering the product is $50,000. Labor and material costs are estimated to be approximately $25.00 per product. If the product is sold for $35.00 each, the firm’s break-even volume would be:

a) 50,000 units
b) 5,000 units
c) 2,500 units
d) 500 units
b) 5,000 units

All of the financial statements are for a period of time except the

a) Income statement
b) Owner’s equity statement
c) Balance sheet
d) Statement of cash flows
c) Balance sheet

The Bill of Rights refers to:

a) the inalienable rights found at the beginning of the Constitution

b) the first ten amendments to the Constitution

c) a specific listing of individual rights found in the original text of the Constitution.

d) a grouping of individual rights set forth by the United States Supreme Court shortly after the Constitution was ratified by the states
b) the first ten amendments to the Constitution

Which one of the following statements is correct given the following exchange rates?

US $ per 1 foreign unit

Country FRI THU
South Africa 0.1028 0.1023
Thailand 0.0284 0.0286

a) On Thursday, one U.S. dollar was equal to 0.1023 South African rand.

b) On Friday, one Thai baht was equal to $35.21.

c) Both the South African rand and the Thai baht appreciated against the U.S. dollar from Thursday to Friday.

d) The South African rand appreciated from Thursday to Friday against the U.S. dollar.

e) The U.S. dollar depreciated from Thursday to Friday against the Thai baht.
d) The South African rand appreciated from Thursday to Friday against the U.S. dollar.

Family branding refers to a group of:

a) similar brands of products from different makers

b) different brands of products from different makers within the same industry

c) different products marketed under a single brand name

d) similar products sold by small, family-owned firms
c) different products marketed under a single brand name

A major competitor of XYZ, Inc. suddenly creates a new type of product that makes XYZ’s products obsolete. This is an example of which type of force in the environment?

a) General environment
b) Task environment
c) Economic environment
d) Legal environment
e) Political environment
b) Task environment

Which of the following statements about a systems flowchart is true?

a) It is used in systems design to define and describe each piece of data.

b) It is a method of writing programs using only three basic constructs: sequence, selection,
and repetition.

c) It documents the sequence of processing steps that take place in an information system.

d) It documents the logical design of an information system.
c) It documents the sequence of processing steps that take place in an information system.

In general, the _ difficult it is for an organization to enter an industry as a new competitor, the _ are the barriers to entry to this industry

a) Less; lower
b) More; lower
c) More; higher
d) Less; higher
c) More; higher

Only one of the following statements is false at the long-run equilibrium for a firm in a monopolistically competitive industry. Which one is false?

a) Price equals Average Total Cost, like a competitive firm

b) Price exceeds marginal cost, like a monopolist

c) Firms make zero economic profit, like a competitive firm

d) Firms produce at the bottom of the ATC curve, like a competitive firm
d) Firms produce at the bottom of the ATC curve, like a competitive firm

Dreamland Pillow Company sells the “Old Softy” model for $20 each. One pillow requires two pounds of raw material and one hour of direct labor to manufacture. Raw material costs $3 per pound and direct production labor is paid $4 per hour. Fixed supervisory costs are $2,000 per month and Dreamland rents its factory on a five-year lease for $4,000 per month. All costs are considered costs of production.

Another firm has offered to produce “Old Softy” and sell them to Dreamland for $12 each. Dreamland cannot avoid the factory lease payments, but can avoid all labor costs if it does not produce these pillows. Under these conditions, how many “Old Softy” pillows must Dreamland sell to earn monthly gross profits of $1,000?

a) 417
b) 500
c) 625
d) 875
c) 625

When a trial is conducted with a jury, the judge determines issues of _ and the jury determines questions of _

a) evidence, law.
b) law, evidence
c) law, fact
d) fact, law
c) law, fact

What is the major distinction between executive and independent agencies?

a) Executive agencies govern business issues while independent agencies regulate individual matters.

b) The president has greater control over executive agencies.

c) The Administrative Procedure Act regulates independent agencies but not executive agencies.

d) Subpoenas may be issued by independent agencies; executive agencies do not have subpoena power.
b) The president has greater control over executive agencies.

Which of the following terms refers to the phenomenon in which group members are pressured to conform in decision making?

a) Group consensus
b) Brainstorming
c) Group norms
d) Groupthink
d) Groupthink

How many pillows must Dreamland produce and sell each month to earn a monthly gross profit of $1,000?

a) 300
b) 350
c) 600
d) 700
d) 700

An example of an unfair trade practice is:

a) EU Government policy prohibiting imports of U.S. Beef

b) EU prohibitions of Latin American bananas

c) US tariffs on European steel

d) All of the above
d) All of the above

The channels of distribution create all of the following utilities EXCEPT:

a) time
b) place
c) form
d) possession
c) form

The two international treaties that govern patent protection are

a) Paris Convention and Patent Cooperation Treaty

b) International Patent Patrol and Patent Treaty

c) Patent Protection Treaty and International Patent Patrol

d) Patent Protection Treaty and Patent Cooperation Treaty
a) Paris Convention and Patent Cooperation Treaty

The principle of diversification tells us that:

a) concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk.

b) concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk.

c) spreading an investment across five diverse companies will not lower the total risk.

d) spreading an investment across many diverse assets will eliminate all of the systematic risk.

e) spreading an investment across many diverse assets will eliminate some of the total risk
e) spreading an investment across many diverse assets will eliminate some of the total risk

A department manager telephoned two managers in other departments to discuss a cost savings idea that would benefit their departments as well as her own. Which of the following most accurately defines the communication channel that the manager was using?

a) Upward
b) Lateral
c) Downward
d) Hierarchical
b) Lateral

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

Ms. Thornton plans to conduct an online survey of her customers. What is the most significant problem with using this survey method rather than a traditional mail approach?

a) Respondents may not answer the survey truthfully.

b) Customers who do not use the Internet will not be in the sample.

c) Respondents will not be able to see the entire survey and thus may answer only part of it.

d) Online surveys cannot prevent multiple or inappropriate responses to complex questions.
b) Customers who do not use the Internet will not be in the sample.

Carefully dismantling and inspecting a competitor’s product to look for design features that can be incorporated into your own product is known as:

a) concurrent design
b) design for manufacturability
c) benchmarking
d) reverse engineering
d) reverse engineering

A SWOT analysis examines a company’s:

a) strategies, weaknesses, opportunities, and threats

b) strengths, weaknesses, opportunities, and threats

c) strategies, weaknesses, opportunities, and tactical plans

d) strengths, weaknesses, operational plans, and threats
b) strengths, weaknesses, opportunities, and threats

A company’s buying center encompasses:

a) a representative from each department within an organization

b) only a gatekeeper and a buyer

c) everyone who is involved in any aspect of the buying process

d) an exclusive top-notch buying department
c) everyone who is involved in any aspect of the buying process

The degree to which a product meets pre-established standards is known as

a) conformance
b) performance
c) reliability
d) none of the above
a) conformance

The control of the money supply by the Federal Reserve System is known as:

a) fiscal policy
b) supply-side policy
c) congressional policy
d) monetary policy
d) monetary policy

On May 31, Company O’s general ledger shows a cash balance of $5,123. The May 31 bank statement shows a balance of $4,905. Other information is available as follows:

A May 31 deposit of $300 does not appear on the bank statement; but a $3 service charge does.
A customer’s $40 insufficient funds check has been returned with the bank statement.
Outstanding checks of $10, $15, and $100 are identified on May

What is the correct cash balance on May 31?

a) $4,905
b) $5,080
c) $5,166
d) $5,204
b) $5,080

When using a flexible budget, a decrease in activity within the relevant range:

a) decreases variable cost per unit
b) decreases total costs
c) increases total fixed costs
d) increases variable cost per unit
b) decreases total costs

Green desires to form a new company to manufacture lawn mowers. Green is concerned about having his personal assets exposed to liability for the new company’s contracts and torts. Furthermore, he wants to retain control over the company’s operations and growth for the next few years. He will need an infusion of equity capital to begin operations. He hopes to take the company public in about five years if it is advantageous to do so at the time. Which of the following types of associations would be best for Green’s new company?

a) Corporation
b) General partnership
c) Limited partnership
d) Member-managed limited-liability company
a) Corporation

Keith is working on a computerized search through one of his company’s massive data files. The purpose of the search is to try to detect patterns in product sales. Keith is engaged in:

a) data forecasting
b) marketing decision support systems
c) data mining
d) sales forecasting
c) data mining

In the statement of cash flows, the section for cash flows from operating activities will include which of the following?

a) Dividends paid
b) Issuance of common stock
c) A decrease in accounts payable
d) Purchase of a building financed entirely by a mortgage
c) A decrease in accounts payable

Based on the central limit theorem, the size of the sampling error is:

a) Directly related to the sample size, i.e., the larger the sample size the larger the sampling error

b) Directly related to the population mean, i.e., the larger the mean, the larger the sampling error

c) Inversely related to the sample size, i.e., the larger the sample size the smaller the sampling error

d) Inversely related to the population standard deviation, i.e., the smaller the standard deviation, the larger the sampling error
c) Inversely related to the sample size, i.e., the larger the sample size the smaller the sampling error

The most appropriate level of market coverage for shopping goods is

a) intensive distribution
b) selective distribution
c) uniform distribution
d) exclusive distribution
b) selective distribution

All of the following are true regarding a seller’s rights to reduce legal liability in the sale of non-consumer goods EXCEPT:

a) The seller can disclaim consequential
damages if it is done clearly and conspicuously.

b) The seller can limit the remedy available to the buyer if he or she does so clearly and
fairly.

c) The seller can place reasonable conditions on the warranty coverage and a shorter time limit of warranty coverage.

d) The seller can disclaim all implied warranties by simply stating that there are no implied warranties.
d) The seller can disclaim all implied warranties by simply stating that there are no implied warranties.

Which of the following should be shown net of tax on a corporation’s income statement?

a) Discontinued operations
b) Operating income
c) Gross profit
d) Gain on sale of delivery truck
a) Discontinued operations

Littleton, Inc., has fixed costs of $75,000 per month, variable costs of $5 per unit, and a sales price per unit of $30. What is the break-even quantity per month?

a) 2,143
b) 2,500
c) 3,000
d) 15,000
c) 3,000

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

Because pictures of products, either in print or on the Internet, can differ from the actual appearance of a piece of jewelry, Priceless Treasures’ customers are sometimes disappointed by items they have purchased. To reduce customer dissatisfaction, the firm’s customer service representatives call customers to answer any questions they have, confirm their satisfaction with the purchase, and communicate the firm’s refund/return policies.

The firm is seeking to influence the customers’ purchase decision process by:

a) stimulating customers to recognize a need of which they were previously unaware

b) facilitating an information search by providing new information

c) influencing alternative assessment by emphasizing the value of the purchased item

d) reducing cognitive dissonance through the reassurance of personal contact
d) reducing cognitive dissonance through the reassurance of personal contact

Which of the following would most likely occur as a result of the United States government’s imposing tariffs on foreign steel imports?

a) The price of steel produced in the United States would decrease.

b) The price of imported steel in the United States would decrease.

c) Employment in the United States steel industry would increase.

d) Government tax revenue would fall.
c) Employment in the United States steel industry would increase.

In marketing research, a firm might consider using secondary data over primary data because

a) secondary data usually cost less
b) secondary data are usually more accurate
c) primary data are usually non specific
d) primary data are likely to be outdated
a) secondary data usually cost less

In organizational decision making, managers are able to exercise the greatest degree of discretion in the

a) enforcement of internal policies
b) settlement of legal disputes
c) restructuring of outstanding loans
d) compliance with federal regulations
a) enforcement of internal policies

The term “net working capital” refers to

(A) inventories, receivables, and current notes and investments
(B) assets divided by liabilities
(C) current assets less short-term liabilities
(D) net assets left over after subtracting cost of goods sold
(C) current assets less short-term liabilities

Dreamland Pillow Company sells the “Old Softy” model for $20 each. One pillow requires two pounds of raw material and one hour of direct labor to manufacture.

Raw material costs $3 per pound and direct production labor is paid $4 per hour. Fixed supervisory costs are $2,000 per month and Dreamland rents its factory on a five-year lease for $4,000 per month. All costs are considered costs of production.

How many pillows must Dreamland produce and sell each month to earn a monthly gross profit of $1,000?

(A) 300
(B) 350
(C) 600
(D) 700
(D) 700

VC = (2 lbs$3)+$4 = $10 FC = $2,000+$4,000 = $6,000 CM per unit = $20-(VC) $10=$10 $1,000 = (units sold$10)-$6,000

Units sold = ($1,000+$6,000)/$10 = 700 pillows

Dreamland Pillow Company sells the “Old Softy” model for $20 each. One pillow requires two pounds of raw material and one hour of direct labor to manufacture.

Another firm has offered to produce “Old Softy” pillows and sell them to Dreamland for $12 each. Dreamland cannot avoid the factory lease payments, but can avoid all labor costs if it does not produce these pillows. Under these conditions, how many “Old Softy” pillows must Dreamland sell to earn monthly gross profits of $1,000?

(A) 417
(B) 500
(C) 625
(D) 875
(C) 625

Dreamland VC per unit = $12
FC = $4,000
CM per unit = $20-(VC) $12=$8
(GP) $1,000 = (units sold*$8)-$4,000

Units sold = ($1,000+$4,000)/$8 = 625 pillows

Which of the following statements about a systems flowchart is true?

(A) It is used in systems design to define and describe each piece of data.
(B) It is a method of writing programs using only three basic constructs: sequence, selection, and repetition.
(C) It documents the sequence of processing steps that take place in an information system.
(D) It documents the logical design of an information system.
(D) It documents the logical design of an information system.

Which of the following statements about the tort of negligence is true?

(A) It cannot be used as a basis for liability for defective products.
(B) It is a strict liability tort with no defenses.
(C) It requires proof of some intentional conduct.
(D) It requires proof of breach of a statutory or common-law duty.
(C) It requires proof of some intentional conduct.

On May 31, Company O’s general ledger shows a cash balance of $5,123. The May 31 bank statement shows a balance of $4,905. Other information is available as follows:

A May 31 deposit of $300 does not appear on the bank statement; but a $3 service charge does.
A customer’s $40 insufficient funds check has been returned with the bank statement.
Outstanding checks of $10, $15, and $100 are identified on May

What is the correct cash balance on May 31?
(A) $4,905
(B) $5,080
(C) $5,166
(D) $5,204
(B) $5,080

Cash Balance 5,123.00
Service charge (3.00)
NSF Check from customer (40.00)
Correct cash balance 5,080.00

Within the context of the capital asset pricing model (CAPM), the risk measure known as beta is often computed by regressing the return of the company’s stock against the

(A) return on the company’s bonds
(B) return on the market portfolio
(C) change in the gross domestic product
(D) change in the consumer price index
(B) return on the market portfolio

(A) each of the 150 jobs
(B) each of the jobs on the three critical paths
(C) either Job J or Job K
(D) both Job J and Job K
(C) either Job J or Job K

The Organization of the Petroleum Exporting Countries (OPEC) reduces production by 10 percent, and the growth rate of the world economy begins to escalate. How will the simultaneous occurrence of these events affect the equilibrium price and quantity in the world petroleum market?

(A) Price will increase, but quantity will remain unchanged.
(B) Price will increase, but quantity is indeterminate.
(C) Quantity will increase, but price is indeterminate.
(D) Both price and quantity will increase.
(B) Price will increase, but quantity is indeterminate.

Which of the following would most likely occur as a result of the United States government’s imposing tariffs on foreign steel imports?

(A) The price of steel produced in the United States would decrease.
(B) The price of imported steel in the United States would decrease. (C) Employment in the United States steel industry would increase. (D) Government tax revenue would fall.
(C) Employment in the United States steel industry would increase.

In an economy the unemployment rate is 10 percent and the inflation rate is 1 percent. An appropriate fiscal policy in this phase of the business cycle would be to

(A) increase government spending
(B) increase income taxes
(C) decrease transfer payments
(D) decrease the money supply
(A) increase government spending

Which of the following is an appropriate Federal Reserve action to stimulate the United States economy?

(A) Selling government bonds on the open market
(B) Increasing the discount rate
(C) Reducing the reserve requirement
(D) Cutting taxes
(C) Reducing the reserve requirement

If the spread between the spot and forward exchange rates of two currencies equals the interest rate difference between the two countries, this phenomenon is referred to as

(A) purchasing-power equality
(B) commodity arbitrage
(C) currency hedging
(D) interest-rate parity
(D) interest-rate parity

A firm that would like to know whether it has enough cash to meet its bills would be most likely to use which category of financial ratio?

(A) Liquidity
(B) Leverage
(C) Efficiency
(D) Profitability
(A) Liquidity

In a period of rising prices, which inventory valuation method would generally yield both the lowest ending inventory value and the lowest net income figure?

(A) First in, first out (FIFO)
(B) Last in, first out (LIFO)
(C) Weighted average
(D) Standard cost
(B) Last in, first out (LIFO)

In the statement of cash flows, the section for cash flows from operating activities will include which of the following?

(A) Dividends paid
(B) Issuance of common stock
(C) A decrease in accounts payable
(D) Purchase of a building financed entirely by a mortgage
(C) A decrease in accounts payable

Net income $100,000
Depreciation expense $10,000
Net increase in accounts receivable $5,000
Net increase in accounts payable $3,000

On the basis of the information provided in the table above for a corporation, the corporation’s net cash flow from operating activities for the current year is

(A) $98,000
(B) $102,000
(C) $108,000
(D) $118,000
(C) $108,000

Net profit 100,000
Add: Non cash Exp (Dep) 10,000
Less: Inc in A/R (5,000)
Add: Inc in A/P 3,000
Net cash flow from operating activities 108,000

All of the following are true regarding a seller’s rights to reduce legal liability in the sale of nonconsumer goods EXCEPT:

(A) The seller can disclaim consequential damages if it is done clearly and conspicuously.
(B) The seller can limit the remedy available to the buyer if he or she does so clearly and fairly.
(C) The seller can place reasonable conditions on the warranty coverage and a shorter time limit of warranty coverage.
(D) The seller can disclaim all implied warranties by simply stating that there are no implied warranties.
(D) The seller can disclaim all implied warranties by simply stating that there are no implied warranties.

Green desires to form a new company to manufacture lawn mowers. Green is concerned about having his personal assets exposed to liability for the new company’s contracts and torts. Furthermore, he wants to retain control over the company’s operations and growth for the next few years. He will need an infusion of equity capital to begin operations. He hopes to take the company public in about five years if it is advantageous to do so at the time. Which of the following types of business associations would be best for Green’s new company?

(A) Corporation
(B) General partnership
(C) Limited partnership
(D) Member-managed limited-liability company
(A) Corporation

(A) committee
(B) task force
(C) group
(D) team
(D) team

(A) Upward
(B) Lateral
(C) Downward
(D) Hierarchical
(B) Lateral

Based on his scientific management theory, Frederick Taylor developed what pay principle?

(A) Hourly pay
(B) Incentive pay
(C) Profit sharing
(D) Monthly salary with bonus
(B) Incentive pay

When a domestic firm permits a foreign company to manufacture and sell its product in exchange for a fee or royalty, the process is termed

(A) importing
(B) exporting
(C) licensing
(D) countertrading
(C) licensing

An information system that enables all business departments in the same firm to share relevant information and data is called

(A) an enterprise resource planning (ERP) system
(B) a material requirements planning (MRP) system
(C) a decision support system (DSS)
(D) a point-of-sale (POS) system
(A) an enterprise resource planning (ERP) system

The central processing unit (CPU) in a personal computer contains the

(A) control unit and primary memory
(B) control unit and arithmetic/logic unit
(C) arithmetic/logic unit and bus
(D) arithmetic/logic unit only
(B) control unit and arithmetic/logic unit

Web 2.0 is best represented by which of the following phenomena?

(A) Social networking sites
(B) Word processing
(C) Internet browsers
(D) Text messaging
(A) Social networking sites

Family branding refers to a group of

(A) similar brands of products from different makers
(B) different brands of products from different makers within the same industry
(C) different products marketed under a single brand name
(D) similar products sold by small, family-owned firms
(C) different products marketed under a single brand name

With this investment, the hospital is attempting to overcome which of the constraints of services marketing?

(A) Inventory
(B) Intangibility
(C) Inconsistency
(D) Inseparability
(D) Inseparability

(A) 0.20
(B) 0.25
(C) 0.33
(D) 0.50
(A) 0.20

(3/6)*(2/5) = 0.20

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

(A) Summarize the research findings and recommend implementing the online catalog as the firm’s market is clearly growing.
(B) Collect primary data to determine whether these trends and preferences are reflected in Priceless Treasures’ customer base.
(C) Collect primary data on competitors to determine whether the online market for antique jewelry is saturated.
(D) End the study and retain the current system as the major customer segment is clearly skeptical of online retailers.
(B) Collect primary data to determine whether these trends and preferences are reflected in Priceless Treasures’ customer base.

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

Ms. Thornton plans to conduct an online survey of her customers. What is the most significant problem with using this survey method rather than a traditional mail approach?

(A) Respondents may not answer the survey truthfully.
(B) Customers who do not use the Internet will not be in the sample. (C) Respondents will not be able to see the entire survey and thus may answer only part of it.
(D) Online surveys cannot prevent multiple or inappropriate responses to complex questions.
(B) Customers who do not use the Internet will not be in the sample.

Priceless Treasures is an antique jewelry retailer. Priceless Treasures’ owner, Sally Thornton, wishes to replace the printed catalog with an online catalog.

Ms. Thornton decides to conduct a market research project to explore how Priceless Treasures’ target customers would respond to the online catalog approach.

(A) stimulating customers to recognize a need of which they were previously unaware
(B) facilitating an information search by providing new information (C) influencing alternative assessment by emphasizing the value of the purchased item
(D) reducing cognitive dissonance through the reassurance of personal contact
(D) reducing cognitive dissonance through the reassurance of personal contact

Absolute advantage.
The economic advantage one nation enjoys that is absolutely superior to other nations.

Absorptive capacity
The ability to recognize the value of new information, assimilate it, and apply it.

Accommodative strategy.
A strategy characterized by some support from top managers, who may increasingly view CSR as a worthwhile endeavor.

Acquisition.
A transfer of the control of operations and management from one firm (target) to another (acquirer), the former be coming a unit of the latter.

Acquisition premium.
The difference between the acquisition price and the market value of target firms.

Adaptability.
The ability to change supply chain configurations in response to longer-term changes in the environment and technology.

Administrative policy.
Bureaucratic rules that make it harder to import foreign goods.

Agency costs.
The costs associated with principal-agent relationships.

Agency relationship.
The relationship between principals (such as shareholders) and agents (such as professional managers).

Agency theory.
A theory that focuses on principal-agent relationships (or in short, agency relationships).

Agent.
A person (such as manager) to whom authority is delegated.

Agglomeration.
Clustering of economic activities in certain locations.

Agility.
The ability to react quickly to unexpected shifts in supply and demand.

Alignment.
Alignment of interests of various players.

Andean Community.
A customs union in South America that was launched in 1969.

Antidumping duty.
Tariff s levied on imports that have been “dumped” (selling below costs to “unfairly” drive domestic firms out of business).

Antidumping laws.
Laws that make it illegal for an exporter to sell goods below cost abroad with the intent to raise prices after eliminating local rivals.

Antitrust laws.
Laws that outlaw cartels (trusts).

Antitrust policy.
Government policy designed to combat monopolies and cartels.

Appreciation.
An increase in the value of the currency.

Asia-Pacific Economic Cooperation {APEC).
The official title for regional economic integration involving 21 member economies around the Pacific.

Association of Southeast Asian Nations {ASEAN).
The organization underpinning regional economic integration in Southeast Asia.

Attack.
An initial set of actions to gain competitive advantage.

Australia-New Zealand Closer Economic Relations Trade Agreement {ANZCERTA or CER).
A free trade agreement between Australia and New Zealand that was launched in 1983.

Balance of payments.
A country’s international transaction statement, which includes merchandise trade, service trade, and capital movement.

Balance of trade.
The aggregation of importing and exporting that leads to the country-level trade surplus or deficit.

Balance sheet approach.
A compensation approach that balances the cost of living differences relative to parent country levels and adds a financial inducement to make the package attractive.

Bandwagon effect.
The effect of investors moving in the same direction at the same time, like a herd.

Bargaining power.
Ability to extract favorable outcome from negotiations due to one party’s strengths.

Base of the pyramid.
Economies where people make less than $2,000 per capita per year.

Beijing Consensus.
A view that questions Washington Consensus’ belief in the superiority of private ownership over state owner ship in economic policy making, which is often associated with the position held by the Chinese government.

Benchmarking.
Examining whether a firm has resources and capabilities to per form a particular activity in a manner superior to competitors.

Bid rate.
The price to buy a currency.

Blue ocean strategy.
Strategy that focuses on developing new markets (“blue ocean”) and avoids attacking core markets defended by rivals, which is likely to result in a bloody price war or a “red ocean.”

Bond.
Loan issued by the firm and held by creditors.

Bondholder.
Buyer of bonds.

Born global.
Start-up companies that attempt to do business abroad from inception.

Bounded rationality.
The necessity of making rational decisions in the absence of complete information.

Bretton Woods system.
A system in which all currencies were pegged at a fixed rate to the US dollar.

BRIC.
Brazil, Russia, India, and China.

Build-operate-transfer {BOT) agreement.
A nonequity mode of entry used to build a longer-term presence by building and then operating a facility for a period of time before transferring operations to a domestic agency or firm.

Business process outsourcing {BPO).
Outsourcing business processes to third-party providers.

Capability.
The tangible and intangible assets a firm uses to choose and implement its strategies.

Capacity to punish.
Sufficient resources possessed by a price leader to deter and combat defection.

Capital flight.
A phenomenon in which a large number of individuals and companies exchange domestic currency for a foreign currency.

Captive sourcing.
Setting up subsidiaries abroad so that the work done is in-house but the location is foreign. Also known as foreign direct investment (FDI).

Cartel (trust).
An output- and price-fixing entity involving multiple competitors.

Causal ambiguity.
The difficulty of identifying the causal determinants of a firm’s successful performance.

Center of excellence.
An MNE subsidiary explicitly recognized as a source of important capabilities, with the intention that these capabilities be leveraged by, and/or disseminated to, other subsidiaries.

CEO duality.
The CEO doubles as a chairman of the board.

Chief executive officer (CEO).
The main executive manager in charge of the firm.

Civil law.
A legal tradition that uses comprehensive statutes and codes as a primary means to form legal judgments.

Civilization.
The highest cultural grouping of people and the broadest level of cultural identity people have.

Classical trade theories.
The major theories of international trade that were advanced before the 20th century, which consist of (1) mercantilism, (2) absolute advantage, and (3) comparative advantage.

Clean (or free) float.
A pure market solution to determine exchange rates.

Cluster.
Countries that share similar cultures.

Code of conduct (code of ethics).
A set of guidelines for making ethical decisions.

Cognitive pillar.
The internalized (or taken-for-granted) values and beliefs that guide individual and firm behavior.

Collectivism.
The idea that an individual’s identity is fundamentally tied to the identity of his or her collective group.

Collusion.
Collective attempts between competing firms to reduce competition.

Collusive price setting.
Price setting by monopolists or collusion parties at a level higher than the competitive level.

Co-marketing.
Efforts among a number of firms to jointly market their products and services.

Command economy.
An economy that is characterized by government ownership and control of factors of production.

Commoditization.
A process of market competition through which unique products that command high prices and high margins gradually lose their ability to do so, thus becoming commodities.

Common denominator.
A currency or commodity to which the value of all currencies are pegged.

Common law.
A legal tradition that is shaped by precedents and traditions from previous judicial decisions.

Common market.
Combining everything a customs union has, a common market, in addition, permits the free movement of goods and people.

Comparative advantage.
Relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.

Compensation.
The determination of salary and benefits.

Competition policy.
Government policy governing the rules of the game in competition.

Competitive dynamics.
Actions and responses undertaken by competing firms.

Competitor analysis.
The process of anticipating rivals’ actions in order to both revise a firm’s plan and prepare to deal with rivals’ response.

Complementary assets.
The combination of numerous resources and assets that enable a firm to gain a competitive advantage.

Concentrated ownership and control.
Founders start up firms and completely own and control them on an individual or family basis.

Concentration ratio.
The percentage of total industry sales accounted for by the top four, eight, or twenty firms.

Contagion (imitation) effect.
The reaction of local firms to rise to the challenge demonstrated by MNEs through learning and imitation.

Contender strategy.
Strategy that centers on a firm engaging in rapid learning and then expand overseas.

Context.
The underlying background upon which social interaction takes place.

Contractual (non-equity-based) alliances.
Associations be tween firms that are based on contracts and do not involve the sharing of ownership.

Corporate governance.
The relationship among various participants in determining the direction and performance of corporations.

Corporate social responsibility (CSR)
Consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks.

Corruption
The abuse of public power for private benefits, usually in the form of bribery.

Cost of capital.
The rate of return that a firm needs to pay to capital providers.

Counterattack.
A set of actions in response to attack.

Country-of-origin effect.
The positive or negative perception of firms and products from a certain country.

Country (regional) manager.
Manager of a geographic area, either a country or a region.

Cross-listing.
Listing shares on a foreign stock exchange.

Cross-market retaliation.
Retaliatory attacks on a competitor’s other markets if this competitor attacks a firm’s original market.

Cross-shareholding.
Both firms investing in each other to become cross-shareholders.

Cultural distance.
The difference between two cultures along identifiable dimensions such as individualism.

Cultural intelligence.
An individual’s ability to understand and adjust to new cultures.

Culture.
The collective programming of the mind that distinguishes the members of one group or category of people from another.

Currency board.
A monetary authority that issues notes and coins convertible into a key foreign currency at a fixed exchange rate.

Currency hedging.
A transaction that protects traders and investors from exposure to the fluctuations of the spot rate.

Currency risk.
The potential for loss associated with fluctuations in the foreign exchange market.

Currency swap.
A foreign exchange transaction between two firms in which one currency is converted into another at Time 1, with an agreement to revert it back to the original currency at a specified Time 2 in the future.

Customs union.
One step beyond a free trade area (FTA), a customs union imposes common external policies on nonparticipating countries.

Deadweight cost.
Net losses that occur in an economy as a result of tariffs.

Debt.
A loan that the firm needs to pay back at a given time with an interest.

Default.
A firm’s failure to satisfy the terms of a loan obligation.

Defender strategy.
Strategy that centers on local assets in areas in which MNEs are weak.

Defensive strategy.
A strategy that focuses on regulatory compliance but with little actual commitment to CSR by top management.

Democracy.
A political system in which citizens elect representatives to govern the country on their behalf.

Demonstration effect.
The reaction of local firms to rise to the challenge demonstrated by MNEs through learning and imitation.

Depreciation.
A loss in the value of the currency.

Development.
Long-term, broader preparation to improve managerial skills for a better career.

Diffused ownership.
Publicly traded corporations owned by numerous small shareholders but none with a dominant level of control.

Direct exports.
The sale of products made by firms in their home country to customers in other countries.

Dirty (or managed) float.
Using selective government intervention to determine exchange rates.

Dissemination risk.
The risk associated with unauthorized diffusion of firm-specific know-how.

Distribution channel.
The set of firms that facilitates the movement of goods from producers to consumers.

Dodger strategy.
Strategy that centers on cooperating through joint ventures with MNEs and sell-offs to MNEs.

Doha Round.
A round of WTO negotiations to reduce agricultural subsidies, slash tariffs, and strengthen intellectual property protection that started in Doha, Oatar, in 2001. Officially known as the “Doha Development Agenda,” it was suspended in 2006 due to disagreements.

Downstream vertical FDI.
A type of vertical FDI in which a firm engages in a downstream stage of the value chain in a host country.

Dumping.
An exporter selling goods below cost.

Due diligence.
Investigation prior to signing contracts.

Economic system.
Rules of the game on how a country is governed economically.

Economic union.
Having all the features of a common market, members also coordinate and harmonize economic policies (in areas such as monetary, fiscal, and taxation) to blend their economies into a single economic entity.

Emerging economies.
A term that has gradually replaced the term
“developing countries” since the 1990s.

Emerging markets.
A term that is often used interchangeably with
“emerging economies.”

Entrepreneurs.
Founders and/or owners of new businesses or man
agers of existing firms who identify and exploit new opportunities.

Entrepreneurship.
The identification and exploitation of previously unexplored opportunities.

Equity.
The stock in a firm (usually expressed in shares), which represents the owners’ rights.

Equity-based alliances.
Alliances based on ownership or financial interest between the firms.

Equity mode.
A mode of entry (JV and WOS) that indicates a relatively larger, harder-to-reverse commitment.

Ethical relativism.
A perspective that suggests that all ethical standards are relative.

Ethical imperialism.
A perspective that suggests that “there is one set of Ethics (with a capital E) and we have it.”

Ethics.
The principles, standards, and norms of conduct that govern individual and firm behavior.

Ethnocentric approach.
An emphasis on the norms and practices of the parent company (and the parent country of the MNE) by relying on PCNs.

Euro.
The currency currently used in 17 EU countries.

Ethnocentrism.
A self-centered mentality by a group of people who perceive their own culture, ethics, and norms as natural, rational, and morally right.

Euro zone.
The 17 EU countries that currently use the euro as the official currency.

European Union (EU).
The official title of European economic integration since 1993.

Exit-based mechanisms
Corporate governance mechanisms that focus on exit, indicating that shareholders no longer have patience and are willing to “exit” by selling their shares.

Expatriate manager.
A manager who works abroad, or “expat” for short.

Expatriation.
The process of selecting, managing, and motivating expatriates to work abroad.

Explicit knowledge.
Knowledge that is codifiable (can be written down and transferred with little loss of richness).

Explicit collusion.
Firms directly negotiate output and pricing and divide markets.

Export intermediary.
A firm that performs an important middle man function by linking domestic sellers and foreign buyers that otherwise would not have been connected.

Exporting.
Selling abroad.

Expropriation.
(1) Government’s confiscation of foreign assets. (2) Activities that enrich controlling shareholders at the expense of minority shareholders.

Extender strategy.
Strategy that centers on leveraging home grown competencies abroad.

Factor endowment.
The extent to which different countries possess various factors of production such as labor, land, and technology.

Factor endowment theory (Heckscher-Ohlin theory).
A theory that suggests that nations will develop comparative advantages based on their locally abundant factors.

FDI outflow.
Outbound FDI moving out of a country in a year.

FDI stock.
Total accumulation of inbound FDI in a country or out bound FDI from a country across a given period (usually several years).

FDI flow.
The amount of FDI moving in a given period (usually a year) in a certain direction.

Femininity.
A relatively weak form of societal-level sex role differentiation whereby more women occupy positions that reward assertiveness and more men work in caring professions.

FDI inflow.
Inbound FDI moving into a country in a year.

Financing.
How a firm’s money, banking, investments, and credit are managed.

First-mover advantages.
Benefits that accrue to firms that enter the market first and that late entrants do not enjoy.

Fixed exchange rate policy.
A government policy to set the exchange rate of a currency relative to other currencies.

Floating (or flexible) exchange rate policy
A government policy to let supply-and-demand conditions determine exchange rates.

Foreign Corrupt Practices Act (FCPA
A US law enacted in 1977 that bans bribery of foreign officials.

Foreign direct investment (FDI).
Investment in, controlling, and managing value-added activities in other countries.

Foreign exchange market.
The market where individuals, firms, governments, and banks buy and sell foreign currencies.

Foreign exchange rate.
The price of one currency in terms of another.

Foreign portfolio investment (FPI).
Investment in a portfolio of foreign securities such as stocks and bonds.

Formal institutions.
Institutions represented by laws, regulations, and rules.

Forward discount.
A condition under which the forward rate of one currency relative to another currency is higher than the spot rate.

Forward premium.
A condition under which the forward rate of one currency relative to another currency is lower than the spot rate.

Forward transaction.
A foreign exchange transaction in which participants buy and sell currencies now for future delivery.

Franchising.
Firm A’s agreement to give Firm B the rights to use A’s proprietary assets for a royalty fee paid to A by B. This is typically done in service industries.

Free market view on FDI.
A political view that suggests that FDI unrestricted by government intervention is the best.

Free trade.
The idea that free market forces should determine how much to trade with little or no government intervention.

Free trade area (FTA).
A group of countries that remove trade barriers among themselves.

Free Trade Area of the Americas (FTAA)
A proposed free trade area for the entire Western Hemisphere.

Game theory.
A theory that studies the interactions between two parties that compete and/or cooperate with each other.

General Agreement on Tariffs and Trade (GATT).
A multilateral agreement governing the international trade of goods (merchandise).

General Agreement on Trade in Services (GATS).
A WTO agreement governing the international trade of services.

Geographic structure.
An organizational structure that organizes the MNE according to different geographic areas (countries and regions).

Geocentric approach.
A focus on finding the most suitable managers, who can be PCNs, HCNs, or TCNs.

Global account structure.
A customer-focused dimension that supplies customers (often other MNEs) in a coordinated and consistent way across various countries.

Global business
Business around the globe.

Global economic integration.
Efforts to reduce trade and investment barriers around the globe.

Global matrix.
An organizational structure often used to alleviate the disadvantages associated with both geographic area and global product division structures, especially for MNEs adopting a trans national strategy.

Global product division structure.
An organizational structure that assigns global responsibilities to each product division.

Global standardization strategy.
A strategy that focuses on development and distribution of standardized products worldwide in order to reap the maximum benefits from low-cost advantages.

Global sustainability.
The ability to meet the needs of the present without compromising the ability of future generations to meet their needs around the world.

Global virtual team.
A team whose members are physically dispersed in multiple locations in the world and often operate on a virtual basis.

Globalization.
The close integration of countries and peoples of the world.

Going rate approach.
A compensation approach that pays expatriates the prevailing (going) rate for comparable positions in a host country.

Gold standard.
A system in which the value of most major currencies was maintained by fixing their prices in terms of gold.

Greenfield operations.
Building factories and offices from scratch (on a proverbial piece of’ “green field” formerly used for agricultural purposes).

Gross national income (GNI).
Gross domestic product (GOP) plus income from non-resident sources abroad. GNI is the term used by the World Bank and other international organizations to supersede the term GNP.

Gross domestic product (GOP).
The sum of value added by resident firms, households, and government operating in an economy.

Gross national product (GNP).
GDP plus income from nonresident sources abroad.

Group of 20 (G-20).
The group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems.

High-context culture.
A culture in which communication relies a lot on the underlying unspoken context, which is as important as the words used.

Home replication strategy.
A strategy that emphasizes the duplication of home country-based competencies in foreign countries.

Horizontal FDI.
A type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country.

Host-country national (HCN).
An individual from the host country who works for an MNE.

Hubris.
Overconfidence in one’s capabilities.

Human resource management (HRM).
Activities that attract, select, and manage employees.

Import quota.
Restriction on the quantity of imports.

Import tariff.
A tax imposed on imports.

Importing.
Buying from abroad.

Indirect export.
A way to reach overseas customers by exporting through domestic-based export intermediaries.

Individualism.
The idea that an individual’s identity is fundamentally his or her own.

Informal institutions.
Institutions represented by cultures, ethics, and norms.

Infant industry argument.
The argument that if domestic firms are as young as “infants,” in the absence of government intervention, they stand no chances of surviving and will be crushed by mature foreign rivals.

Information asymmetries
Asymmetric distribution and possession of information between two sides.

In-group.
Individuals and firms regarded as a part of “us.”

lnpatriation.
Relocating employees of a foreign subsidiary to the MNE’s headquarters for the purposes of filling skill shortages at headquarters and developing a global mind-set for such inpatriates.

Inside director.
A member of the board who is a top executive of the firm.

Institution-based view.
A leading perspective in global business that suggests that the success and failure of firms are enabled and constrained by institutions.

Institutional distance.
The extent of similarity or dissimilarity be tween the regulatory, normative, and cognitive institutions of two countries.

Institutional framework.
Formal and informal institutions that govern individual and firm behavior.

Institutional transitions.
Fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect firms as players.

Institutions.
Formal and informal rules of the game.

Intangible resources and capabilities.
Assets that are hard to observe and difficult (if not impossible) to quantify.

Integration-responsiveness framework.
A framework of MNE management on how to simultaneously deal with two sets of pressures for global integration and local responsiveness.

Intellectualproperty.
Intangible property that is the result of intellectual activity.

Intellectual property (IP) rights.
Rights associated with the ownership of intellectual property.

Internalization.
The replacement of cross-border markets (such as exporting and importing) with one firm (the MNE) locating and operating in two or more countries.

International business (IB).
(1) A business (firm) that engages in international (cross-border) economic activities and/or (2) the action of doing business abroad.

International entrepreneurship.
A combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations.

International division.
An organizational structure that is typically set up when firms initially expand abroad, often engaging in a home replication strategy.

International Monetary Fund (IMF).
An international organization that was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements.

International premium.
A significant pay raise when working overseas.

lntrafirm trade.
International transactions between two subsidiaries in two countries controlled by the same MNE.

Joint venture (JV).
A new corporate entity created and jointly owned by two or more parent companies.

Knowledge management.
The structures, processes, and systems that actively develop, leverage, and transfer knowledge.

Knowledge spillover.
Knowledge diffused from one firm to others among closely located firms.

Labor relations.
A firm’s relations with organized labor (unions) in both home and host countries.

Late-mover advantages.
Benefits that accrue to firms that enter the market later and that early entrants do not enjoy.

Learning by doing.
A way of learning, not by reading books but by engaging in hands-on activities.

Learning race.
A situation in which alliance partners aim to outrun each other by learning the “tricks” from the other side as fast as possible.

Legal system.
The rules of the game on how a country’s laws are enacted and enforced.

Letter of credit (L/C).
A financial contract that states that the importer’s bank will pay a specific sum of money to the exporter upon delivery of the merchandise.

Leveraged buyout (LBO).
A means by which investors, often in partnership with incumbent managers, issue bonds and use the cash raised to buy the firm’s stock.

Liability of foreignness.
The inherent disadvantage that foreign firms experience in host countries because of their non-native status.

Licensing.
Firm A’s agreement to give Firm B the rights to use A’s proprietary technology (such as a patent) or trademark (such as a corporate logo) for a royalty fee paid to A by B. This is typically done in manufacturing industries.

Lingua franca.
A global business language.

LLL advantages.
A firm’s quest of linkage (L) advantages, leverage (L) advantages, and learning (L) advantages. These advantages are typically associated with multinationals from emerging economies.

Local content requirement.
A requirement stipulating that a certain proportion of the value of the goods made in one country must originate from that country.

Local responsiveness.
The necessity to be responsive to different customer preferences around the world.

Localization (multidomestic) strategy.
A strategy that focuses on a number of foreign countries/regions, each of which is regarded as a standalone local (domestic) market worthy of significant atten tion and adaptation.

Location.
Advantages enjoyed by firms operating in a certain location.

Location-specific advantages.
The benefits a firm reaps from the features specific to a place.

Long-term orientation.
Dimension of how much emphasis is placed on perseverance and savings for future betterment.

Low-context culture.
A culture in which communication is usually taken at face value without much reliance on unspoken context.

Make- or-buy decision.
The decision on whether to produce in-house (“make”) or to outsource ( “buy”).

Management control rights.
The rights to appoint key managers and establish control mechanisms.

Managerial human capital.
The skills and abilities acquired by top managers.

Managerial motives.
Managers’ desire for power, prestige, and money, which may lead to decisions that do not benefit the firm overall in the long run.

Market commonality.
The overlap between two rivals’ markets.

Market economy.
An economy that is characterized by the “invisible hand” of market forces.

Market imperfection (market failure).
The imperfect rules governing international transactions.

Market orientation.
A philosophy or way of thinking that places the highest priority on the creation of superior customer value in the marketplace.

Market segmentation.
Identifying segments of consumers who differ from others in purchasing behavior.

Marketing.
Efforts to create, develop, and defend markets that satisfy the needs and wants of individual and business customers.

Marketing mix.
The four underlying components of marketing: (1) product, (2) price, (3) promotion, and (4) place.

Masculinity.
A relatively strong form of societal-level sex role differentiation whereby men tend to have occupations that reward assertiveness and women tend to work in caring professions.

Merchandise.
Tangible products being traded.

Mercosur.
A customs union in South America that was launched in 1991.

Merger.
The combination of operations and management of two firms to establish a new legal entity

Microfinance.
A practice to provide micro loans ($50-$300) used to start small businesses with the intention of ultimately lifting the entrepreneurs out of poverty.

Micro-macro link.
The micro, informal interpersonal relationships among managers of various units that may greatly facilitate macro, intersubsidiary cooperation among these units.

Mixed economy.
An economy that has elements of both a market economy and a command economy.

Mode of entry.
Method used to enter a foreign market.

Modern trade theories.
The major theories of international trade that were advanced in the 20th century, which consist of (1) product life cycle, (2) strategic trade, and (3) national competitive advantage of industries.

Monetary union.
A group of countries that use a common currency.

Moral hazard.
Recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions.

Multilateral trading system.
The global system that governs international trade among countries-otherwise known as the GATT/ WTO system.

Multimarket competition.
Firms engage the same rivals in multiple markets.

Multinational enterprise (MNE).
A firm that engages in foreign direct investment (FDI).

Mutual forbearance.
Multimarket firms respect their rivals’ spheres of influence in certain markets, and their rivals reciprocate, leading to tacit collusion.

Nondiscrimination.
A principle that a country cannot discriminate among its trading partners.

Nonequity mode.
A mode of entry (exports and contractual agreements) that tends to reflect relatively smaller commitments to over seas markets.

Nongovernmental organization (NGO).
An organization that is not affiliated with governments.

Nontariff barrier (NTB).
Trade barrier that relies on nontariff means to discourage imports.

Normative pillar.
The mechanism through which norms influence individual and firm behavior.

Norms.
Values, beliefs, and actions of relevant players that influence the focal individuals and firms.

North American Free Trade Agreement (NAFTA).
A free trade agreement among Canada, Mexico, and the United States.

Obsolescing bargain.
The deal struck by MNEs and host governments, which change their requirements after the initial FDI entry.

Offer rate.
The price to sell a currency.

Offshoring.
Outsourcing to an international or foreign firm.

OLI advantages.
A firm’s quest for ownership (0) advantages, location (L) advantages, and internalization (I) advantages via FDI.

Oligopoly.
Industry dominated by a small number of players.

Onshoring.
Outsourcing to a domestic firm.

Open innovation.
The use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use.

Opportunism.
The act of seeking self-interest with guile.

Organizational culture.
The collective programming of the mind that distinguishes the members of one organization from another.

Opportunity cost.
Cost of pursuing one activity at the expense of another activity, given the alternatives (other opportunities).

Organizational fit.
The similarity in cultures, systems, and structures.

Original design manufacturer (ODM).
A firm that both designs and manufactures products.

Original brand manufacturer (OBM).
A firm that designs, manufactures, and markets branded products.

Original equipment manufacturer (OEM).
A firm that executes design blueprints provided by other firms and manufactures such products.

Out-group.
Individuals and firms not regarded as a part of “us.”

Outside director.
A nonmanagement member of the board.

Outsourcing.
Turning over an organizational activity to an outside supplier that will perform it on behalf of the focal firm.

Ownership.
An MNE’s possession and leveraging of certain valu able, rare, hard-to-imitate, and organizationally embedded (VRIO) assets overseas in the context of FDI.

Parent-country national (PCN).
An individual who comes from the parent country of the MNE and works at its local subsidiary.

Patent.
Exclusive legal rights of inventors of new products or processes to derive income from such inventions.

Peg.
A stabilizing policy of linking a developing country ‘s currency to a key currency.

Performance appraisal.
The evaluation of employee performance for promotion, retention, or termination purposes.

Piracy.
Unauthorized use of intellectual property.

Place.
The location where products and services are provided.

Political risk.
Risk associated with political changes that may negatively impact domestic and foreign firms.

Political system.
The rules of the game on how a country is governed politically.

Political union.
The integration of political and economic affairs of a region.

Polycentric approach.
An emphasis on the norms and practices of the host country.

Post-Bretton Woods system.
A system of flexible exchange rate regimes with no official common denominator.

Power distance.
The extent to which less powerful members within a country expect and accept that power is distributed unequally.

Pragmatic nationalism on FDI.
A political view that only approves FDI when its benefits outweigh its costs.

Price
The expenditures that customers are willing to pay for a product.

Predatory pricing.
An attempt to monopolize a market by setting prices below cost and intending to raise prices to cover losses in the long run after eliminating rivals.

Price elasticity.
How demand changes when price changes.

Price leader.
A firm that has a dominant market share and sets “acceptable” prices and margins in the industry.

Primary stakeholder groups.
Constituents on which the firm relies for its continuous survival and prosperity.

Principal.
A person (such as owner) delegating authority.

A person (such as owner) delegating authority.
Conflicts between principals and agents.

Principal-principal conflicts.
Conflicts between two classes of principals: controlling shareholders and minority shareholders.

Prisoners’ dilemma.
In game theory, a type of game in which the outcome depends on two parties deciding whether to cooperate or to defect.

Private equity.
Equity capital invested in private companies that, by definition, are not publicly traded.

Proactive strategy.
A strategy that endeavors to do more than is required in CSR .

Product.
Offerings that customers purchase.

Product life cycle theory.
A theory that accounts for changes in the patterns of trade over time by focusing on product life cycles.

Promotion.
Communicatons that marketers insert into the market
place.

Property rights.
The legal rights to use an economic property (resource) and to derive income and benefits from it.

Protectionism.
The idea that governments should actively protect domestic industries from imports and vigorously promote exports.

Psychological contract
An informal understanding of expected delivery of benefits in the future for current services.

Purchasing power parity (PPP).
A conversion that determines the equivalent amount of goods and services different currencies can purchase.

Quota.
The weight a member country carries within the IMF, which determines the amount of its financial contribution (technically known as its “subscription”), its capacity to borrow from the IMF, and its voting power.

R&D contract.
Outsourcing agreement in R&D between firms.

Radical view on FDI.
A political view that is hostile to FDI.

Reactive strategy.
A strategy that would only respond to CSR causes when required by disasters and outcries.

Real option.
An investment in real operations as opposed to financial capital.

Regional economic integration.
Efforts to reduce trade and in vestment barriers within one region.

Regulatory pillar.
The coercive power of governments.

Related transactions.
Controlling shareholders sell firm assets to another firm they own at below-market prices or spin off the most profitable part of a public firm and merge it with another private firm they own

Relational (or collaborative) capability.
Ability to manage interfirm relationships.

Relationship orientation.
A focus to establish, maintain, and enhance relationships with customers.

Repatriate.
Returning expatriate.

Repatriation.
The process of facilitating the return of expatriates.

Resources (or capabilities).
The tangible and intangible assets a firm uses to choose and implement its strategies.

Resource-based view.
A leading perspective in global business that posits that firm performance is fundamentally driven by differences in firm-specific resources and capabilities.

Resource mobility.
Assumption that a resource used in producing a product for one industry can be shifted and put to use in another industry.

Resource similarity.
The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm.

Reverse innovation.
An innovation that is adopted first in emerging economies and is then diffused around the world.

Risk management.
The identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events.

Scale of entry.
The amount of resources committed to entering a foreign market.

Schengen.
A passport-free travel zone within the EU.

Secondary stakeholder groups.
Those who influence or affect, or are influenced or affected by, the corporation but are not engaged in transactions with the firm and are not essential for its survival.

Scenario planning.
A technique to prepare and plan for multiple scenarios (either high or low risk)

Semiglobalization.
A perspective that suggests that barriers to market integration at borders are high, but not high enough to insulate countries from each other completely.

Separation of ownership and control.
The dispersal of owner ship among many small shareholders. in which control is largely concentrated in the hands of salaried, professional managers who own little (or no) equity.

Serial entrepreneur.
An entrepreneur who starts, grows, and sells several businesses throughout h1s/her career.

Services.
Intangible services being traded.

Shareholder.
Firm owner.

Shareholder capitalism.
A view of capitalism that suggests that the most fundamental purpose for firms to exist is to serve the economic interests of shareholders (also known as capitalists).

Small- and medium-sized enterprises (SMEs)
Firms with fewer than 500 employees in the United States and with fewer than 250 employees in the European Union.

Social capital.
The informal benefits individuals and organizations derive from their social structures and networks.

Social complexity.
The socially intricate and interdependent ways firms are typically organized.

Social issue participation.
Firms’ participation in social causes not directly related to the management of primary stakeholders.

Social mobility.
The degree to which members from a lower social category can rise to a higher status.

Social stratification.
The hierarchical arrangement of individuals into social categories (strata) such as classes, castes, or divisions within a society.

Social structure.
The way a society broadly organizes its members.

Solutions-based structure.
A customer-focused solution in which a provider sells whatever combination of goods and services the customers prefer, including rivals’ offerings.

Sovereign wealth fund (SWF).
A state-owned investment fund composed of financial assets such as stocks, bonds, real estate, or other financial instruments funded by foreign exchange assets.

Spot transaction.
The classic single-shot exchange of one currency for another.

Spread.
The difference between the offer price and the bid price.

Staffing.
HRM activities associated with hiring employees and filling positions.

Stage model.
Model of internationalization that portrays the slow step-by-step (stage-by-stage) process an SME must go through to internationalize its business.

Stakeholder.
Any group or individual who can affect or is affected by the achievement of the organization’s objectives.

State-owned enterprise.
A firm owned and controlled by the state (government).

Stewardship theory.
A “pro-management” theory that suggests that most managers can be viewed as owners’ stewards interested in safeguarding shareholders’ interests.

Strategic fit.
The effective matching of complementary strategic capabilities.

Strategic hedging.
Spreading out activities in a number of countries in different currency zones to offset any currency losses in one region through gains in other regions.

Strategic alliance.
A voluntary agreement of cooperation between firms.

Strategic trade policy.
Government policy that provides companies a strategic advantage in international trade through subsidies and other supports.

Strategic trade theory.
A theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success.

Strategic investment.
One firm investing in another as a strategic investor.

Subsidiary initiative.
The proactive and deliberate pursuit of new opportunities by a subsidiary.

Subsidy.
Government payment to domestic firms.

Sunk cost.
Cost that a firm has to endure even when its investment turns out to be unsatisfactory.

Supply chain.
Flow of products, services, finances, and information that passes through a set of entities from a source to the customer.

Supply chain management.
Activities to plan, organize, lead, and control the supply chain.

SWOT analysis.
A tool for determining a firm’s strengths (S), weaknesses (W), opportunities (0), and threats (T)

Tacit collusion.
Firms indirectly coordinate actions by signaling their intention to reduce output and maintain pricing above competitive levels.

Tacit knowledge.
Knowledge that is non-codifiable, whose acquisition and transfer require hands-on practice.

Tangible resources and capabilities.
Assets that are observable and easily quantified.

Target exchange rates (or crawling bands).
Specified upper or lower bounds within which an exchange rate is allowed to fluctuate.

Technology spillover.
Technology diffused from foreign firms to domestic firms.

Theocratic law.
A legal system based on religious teachings.

Tariff barrier.
Trade barrier that relies on tariffs to discourage imports.

Theory of absolute advantage.
A theory that suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage.

Theory of comparative advantage.
A theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.

Theory of mercantilism.
A theory that suggests that the wealth of the world is fixed and that a nation that exports more and imports less will be richer.

Theory of national competitive advantage of industries (diamond theory).
A theory that suggests that the competitive ad vantage of certain industries in different nations depends on four aspects that form a “diamond.”

Third-country national (TCN).
An individual who is from neither the parent country nor the host country of the MNE.

Third-party logistics (3PL).
A neutral, third-party intermediary in the supply chain that provides logistics and other support services.

Top management team (TMT).
The team consisting of the highest level of executives of a firm led by the CEO.

Total cost of ownership.
Total cost needed to own a product, consisting of initial purchase cost and follow- up maintenance/service cost.

Totalitarianism (dictatorship).
A political system in which one person or party exercises absolute political control over the population.

Trade deficit.
An economic condition in which a nation imports more than it exports.

Trade embargo.
Politically motivated trade sanctions against foreign countries to signal displeasure.

Trade-Related Aspects of Intellectual Property Rights (TRIPS).
A WTO agreement governing intellectual property rights.

Trade surplus.
An economic condition in which a nation exports more than it imports.

Trademark.
Exclusive legal rights of firms to use specific names, brands, and designs to differentiate their products from others.

Training.
Specific preparation to do a particular job.

Transaction costs.
The costs associated with economic transactions or, more broadly, the costs of doing business.

Transnational strategy.
A strategy that endeavors to be simultaneously cost-efficient. locally responsive, and learning-driven around the world.

Triad.
North America, Western Europe, and Japan.

Triple bottom line.
Economic, social, and environmental performance that simultaneously satisfies the demands of all stakeholder groups.

Turnkey project.
A project in which clients pay contractors to de
sign and construct new facilities and train personnel.

Uncertainty avoidance.
The extent to which members in a culture accept or avoid ambiguous situations and uncertainty.

Tunneling.
A form of corporate theft that diverts resources from the firm for personal or family use.

Union of South American Nations (USAN/UNASUR).
A regional integration mechanism integrating two existing customs unions (Andean Community and Mercosur) in South America.

United States-Dominican Republic-Central America Free Trade Agreement (CAFTA).
A free trade agreement between the United States and five Central American countries and the Domini can Republic.

Upstream vertical FDI.
A type of vertical FDI in which a firm engages in an upstream stage of the value chain in a host country.

Value chain.
A series of activities used in the production of goods and services that make a product or service more valuable.

Venture capitalist (VC).
lnvestor who provides risk capital for early stage ventures.

Vertical FDI.
A type of FDI in which a firm moves upstream or downstream at different value chain stages in a host country.

Voice-based mechanisms.
Corporate governance mechanisms that focus on shareholders’ willingness to work with managers, usually through the board, by “voicing” their concerns.

Voluntary export restraint (VER).
An international agreement that shows that exporting countries voluntarily agree to restrict their exports.

VRIO framework.
The resource-based framework that focuses on the value (V). r arity (R), imitability (1). and organizational (0) aspects of resources and capabilities.

Washington Consensus.
A view centered on the unquestioned belief in the superiority of private ownership over state ownership in economic policy making, which is often spearheaded by two Washington-based international organizations: the International Monetary Fund and the World Bank.

Wholly owned subsidiary (WOS).
A subsidiary located in a foreign country that is entirely owned by the parent multinational.

World Trade Organization (WTO).
The official title of the multilateral trading system and the organization underpinning this system since 2005.

Worldwide (global) mandate.
A charter to be responsible for one MNE function throughout the world.

ETS Major Field Test (Answered Test): Bachelor’s Degree in Business.

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