Mid-Term Examination

1. Lucinda recently left a large insurance firm and opened a home-based business preparing medical transcriptions for doctors. Based on recent statistics, she can expect:

A) a negative reaction from friends and family who wonder when she will get a real job.

B) that affordable computer technology will allow her to compete with larger firms.

C) the government will discourage her attempts to create a new business.

D) to find security, routine and a paycheck from her new enterprise.

2. As his college graduation nears, Manny has focused his attention on finding full time employment. He has decided to narrow his job search to jobs with a major corporation. His job search strategy:

A) makes sense because managerial skills are best developed by working for big firms.

B) is smart because major corporations represent the most important source of employment growth in Canada.

C) indicates that Manny’s passion is to fulfill his dream of owning his own business.

D) will likely limit his job prospects since most new jobs are with small businesses.

3. A review of small business successes and failures indicates that the:

A) businesses that are easiest to start offer the greatest potential for long term growth and profits.

B) restaurant industry offers the least risk for entrepreneurs.

C) businesses with the potential of high profit levels tend to be difficult to start and hard to keep going.

D) reason the service sector is rapidly growing is that these firms are easy to start and keep going, and offer high levels of security and growth potential.

4. Motivated by his desire to operate his own business, Caleb is considering the purchase an existing business. As he carefully weights this option, he is likely to find that:

A) very few owners of small businesses have any interest in selling.

B) his potential for success would greatly improve if he started his own new firm.

C) the value of an existing business is determined by what the business owns, what it earns, and what makes it unique.

D) any entrepreneur willing to sell their business is experiencing serious financial problems.

5. Lamont wants to improve his chances to be a successful entrepreneur and so he has written a business plan. One advantage of developing this plan is that it:

A) meets federal reporting requirements of Revenue Canada.

B) insures financing will be available from the venture capitalists.

C) forces Lamont to think carefully about all aspects of his planned business.

D) will enable him to switch from a sole proprietorship to a corporation without any further paperwork.

6. Which of the following statements best describes the theory of comparative advantage?

A) The best way for a nation to ensure full employment is to be totally self-sufficient rather than relying on other nations to obtain goods and services.

B) Each nation should produce those goods that it can produce more efficiently than other nations, and buy the goods it can not produce efficiently from other nations.

C) The nation that has the largest reserves of gold and other natural resources will enjoy a position of comparative advantage in trade relationships.

D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.

7. Both the federal and provincial governments have provided incentives for Toyota to locate a new manufacturing facility in Woodstock Ontario because,

A) Toyota makes significant political contributions.

B) Canada is trying to establish an auto industry.

C) this new facility will export all of its output to Japan.

D) the auto industry is critical to the Canadian economy.

8. There are many ways in which an organization may participate in global trade. Which of the following strategies has the most amount of commitment, control, risk, and profit potential associated with it?

A) exporting

B) foreign direct investment

C) international joint venture and strategic alliances

D) licensing

9. In the article, “”Let’s make a deal, Western-style””, the trade agreement signed between Alberta and British Columbia will,

A) foster greater trade between Alberta and British Columbia with the Far East.

B) force Alberta and British Columbia to increase the amount of trade between the two provinces.

C) allow businesses in either province to buy goods or services from anywhere in Alberta or British Columbia without the added cost of tariffs.

D) impose trade barriers between every other province and the combined provinces of Alberta and British Columbia.

10. Active Learning implies,

A) coming to every lecture during the term.

B) buying all of the course resources identified in the course outline.

C) memorizing all the definitions and formulas in a course.

D) doing and thinking about what you are doing in a course.

11. Governments throughout Canada are privatizing services that they have traditionally offered in response to:

A) an opportunity to realize huge ongoing profits from royalties they will collect from private companies who acquire these services.

B) new laws and regulations that have been passed mandating that these services be privatized.

C) as a means to lower costs and improve efficiencies associated with the provision of these services.

D) as a means of increasing the scope of their involvement in the economy.

12. Ralph owns a small business. Some friends have suggested that he should switch from his current manual accounting system to one that is computerized. Ralph is not certain he wants to use computers in his small firm’s accounting system. He is concerned about the time it would take in learning the system, and wonders whether the benefits will justify the costs of setting up the system. As a small business owner, Ralph would probably find that:

A) computer software tends to be very helpful to small business owners who lack strong accounting support within their companies.

B) today’s accounting software tends to be very complex, so only people with extensive accounting experience can understand its features and use it effectively.

C) even though it is not yet cost effective, he should go ahead and adopt a computerized system, because government regulations will require most business functions to be computerized in the near future.

D) such systems actually reduce costs, because they eliminate the need to ever consult with an accountant.

13. Our Gang Transfer Company has shown consistent profits over the past five years. However, the company has recently found itself in financial trouble due to cash shortages. This indicates that:

A) an accounting profit does not guarantee a positive cash flow.

B) it’s not always important to prepare financial statements.

C) the accountants apparently made a mistake when they prepared the trial balance.

D) the state of the economy is less important than financial control techniques.

14. If a firm can reduce its cost of goods sold and continue to sell its product for the same price, we would expect the firm to enjoy an increase in its ________.

A) revenue

B) liabilities

C) employee turnover

D) gross margin

15. At the time the Jepson Plumbing Supply prepared its financial statements, it had several customers who had bought goods in the past three months on its “”90 days same as cash”” credit plan. These customers had not yet paid their bills, but they have good credit ratings and Jepson is confident that they will make their payments on time. The amount these credit customers owe would show up as part of the:

A) current assets listed on Jepson’s balance sheet.

B) current liabilities listed on Jepson’s balance sheet.

C) a deferred cash flow on Jepson’s statement of cash flows.

D) unrealized revenue reported on Jepson’s income statement.

16. Accountants at Rextech are seriously considering a change in the methods they use to depreciate equipment and value inventory. If they do so, the changes they make:

A) will have no impact on the “”bottom line”” of the firm.

B) will influence the cost of goods sold, but will have no impact on the firm’s operating expenses.

C) must be clearly explained to any readers of Rextech’s financial statements.

D) must be balanced by offsetting changes in the treatment of intangible assets.

17. Your firm is a supplier to a major chain of discount stores. You have heard rumors that this chain of discount stores is in some financial difficulty. Which financial ratios would indicate the discount stores’ ability to pay their short-term debts?

A) Liquidity ratios

B) Leverage ratios

C) Activity ratios

D) Profitability ratios

18. In trying to evaluate the management of inventory you could calculate the inventory turnover ratio and compare that ratio to the industry average. You would conclude that inventory could be managed better if,

A) the company’s inventory turnover was higher than the industry’s.

B) the company’s inventory turnover was lower than the industry’s.

C) cost of goods sold for the company was higher than the industry’s average.

D) cost of goods sold for the company was lower than the industry’s average.

19. When using ratios it’s important to compare a ratio calculated for one company to which of the following?

A) The cash balance at the beginning of the period.

B) The same ratio for the company from the previous year.

C) The same ratio for firms in a different industry.

D) The net income for the current year.

20. Which of the following statements about federal government deficit spending is most accurate?

A) The federal government violates the law by running deficits because the Canadian Constitution requires the government to balance its budget each year.

B) Although the government used to run big deficits, it has consistently run surpluses since the late 1980s.

C) The government has used deficit spending to lower the national debt.

D) One reason the government has a hard time reducing deficits is that there is a great deal of pressure on the government to expand its spending each year.

21. The Canadian system of marketing boards has been under attack by various organizations because:

A) they are illegal under NAFTA.

B) they favour certain provinces over others.

C) not all items are covered.

D) it does not permit normal competitive conditions to operate.

22. Federal and provincial governments use their enormous purchasing power to:

A) favour Canadian companies

B) favour foreign suppliers

C) reduce taxes

D) force private firms to comply with the laws

23. In the article, “”Help Wanted””, one of the current issues with the implementation of a strategy using immigration to grow our Canadian economy is,

A) focus on immigrants with strong technical skills which is not the skill set needed in Canada.

B) inefficient government procedures for processing immigration applications results in a massive backlog.

C) willingness of immigrants to settle everywhere in Canada, specifically in remote areas where their skills are not needed.

D) little regulation of immigrants leading to a lack of desire of immigrants to settle in Canada.

24. Ellen wants to start a business. She is leaning toward setting up her company as a sole proprietorship, but she is also looking at other possibilities. Ellen has two major goals. First, given her limited personal wealth and eagerness to get started, she wants to get her business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Ellen chooses a sole proprietorship, she would:

A) be able to achieve both goals since this form of ownership is both the easiest to form and the least risky.

B) meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to a high level of personal risk because owners of sole proprietorships have unlimited liability.

C) not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability.

D) achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business.

25. Mara plans to open a shop specializing in foods and cultural items from the Middle East. She wants to be the firm’s only general partner, but she is trying to get several friends to participate as limited partners. Apparently Mara wants to:

A) limit her personal liability to the amount she personally invests in the company.

B) be the only person allowed to share in the firm’s profits.

C) obtain a strong financial base for the firm while maintaining personal control over the firm’s management.

D) meet the legal requirements of the Uniform Partnership Act.

26. Marshall Officer is a stockholder in Endrun Investments, which is organized as a corporation. Endrun recently lost a major court decision and will probably be forced into bankruptcy. In fact, the damages awarded are so great that, even if all of its assets are sold and the proceeds are used to pay its debts, Endrun is likely to still owe money to its creditors. If Endrun does go bankrupt, Marshall and the other stockholders will:

A) be personally responsible for all remaining debts.

B) lose their investment but nothing else.

C) be entitled to full reimbursement of any investment losses.

D) automatically qualify for federal reimbursement for any losses suffered by the firm.

27. Which of the following statements about buying a franchise is most accurate?

A) One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed.

B) Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market.

C) Franchise agreements are simple to evaluate, since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained.

D) Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has already worked out all of the details for setting up and running the business.

28. If you sign a personal guarantee, which a lender happens to exercise to collect on a loan, then,

A) by asking for legal advise from a certified lawyer, none of your personal assets could be seized to repay the loan.

B) the guarantee is only valid if signed within the last year.

C) only those personal assets you are willing to have seized, can be taken by the bank.

D) any of your personal assets could be seized to repay the loan in full.

29. In order to resolve conflict within a team,

A) remember that confrontation is not a fight.

B) don’t spend time on issues, focus your attention on the personalities.

C) you should seek outside assistance initially, to speed up the resolve of the conflict.

D) you need to build the best case possible to justify your position, ignoring the position of those you are in conflict with.

30. As the campaign manager for a candidate for the Canadian Federal Parliament, Pete works to learn as much as possible about potential voters. With this information, he hopes to focus the campaign on the issues most important to voters. This represents:

A) the use of marketing by a nonprofit organization.

B) a nonprofit application of the production era strategy.

C) the selling of a political candidate.

D) an extension of the profit orientation to a nonprofit organization.

31. Andre is a real estate agent who has an idea for a software program that will help perform real estate appraisals more quickly and more accurately. He has worked with a buddy who is good at programming to develop a detailed description of what the software will do and how it differs from existing applications. Now Andre has taken this description and shown it to a number of fellow real estate agents to see if his idea appeals to them. Andre is engaging in:

A) prototype outsourcing.

B) test marketing.

C) concept testing.

D) word-of-mouth advertising.

32. Archie just bought a pickup truck with centre armrests that double as laptop workstations. What part of the four Ps is his automobile company addressing?

A) place

B) promotion

C) product

D) price

33. Which of the following is considered a source of selected secondary information?

A) focus group

B) company records

C) surveys

D) observation

34. As part of her responsibilities as a marketing manager, Jan has completed her review of data her department has gathered through telephone interviews, mail surveys and focus groups. Jan is disappointed because the research results strongly suggest that a product idea she helped develop is unlikely to be popular with potential customers. Jan should:

A) proceed with product development because the opinions of experienced marketing managers often turn out to be more accurate than marketing research.

B) accept the research results and reevaluate the proposed product.

C) continue developing the product, but try to find ways to reduce production costs.

D) put the product on temporary hold, throw out the results of the research, and design and conduct new surveys and questionnaires.

35. Which of the following represents an example of demographic segmentation?

A) A firm producing recreational equipment divides its market into groups by region of the country, designing different products for people in different parts of the country.

B) An automobile manufacturer offers different types of cars designed to appeal to different age groups and income levels.

C) A motion picture company divides its market according to the attitudes and interests of its customers, marketing some films to people who enjoy action movies and targeting other movies to people who prefer romantic comedies.

D) A company that produces food products has designed a special line of easy to prepare microwavable meals that are low in low fat and high in fiber to attract people interested in the health benefits of the foods they eat.

36. Which of the following is most consistent with a relationship marketing strategy?

A) The development of a web site that seeks customer feedback and allows customers to communicate with each other.

B) The creation of a national advertising campaign using radio and television to increase market share.

C) Designing a promotional campaign to increase cooperation among the firm’s suppliers.

D) Distributing goods through limited service discount stores.

37. After years of selling in the consumer market, Dave accepted a job as a salesperson for a firm that markets its products in the B2B market. As he considers his new responsibilities, it’s likely that he will:

A) find little difference between buyers in the consumer market and those in the business-to-business market.

B) discover that decision making in the B2B requires salespeople to be little more than order takers.

C) learn that industrial buyers generally require more personal service than buyers in the consumer market.

D) find that B2B buyers tend to purchase more on impulse than consumer buyers.

38. All of the following statements about the B2B market are true except:

A) the markets are often geographically concentrated.

B) industrial buyers are usually large.

C) industrial buyers tend to be more rational.

D) the size of the market is smaller than the consumer market.

39. The article, “”Mind the GAAP””, reminds us that when comparing the net income of two companies, one reporting using Canadian GAAP and the other using US GAAP,

A) there is no difference in the reported net income.

B) the use of Canadian GAAP will always result in higher reported income than the use of US GAAP.

C) there is no consistent difference when using these different GAAPs.

D) the difference in reported net incomes will depend on the current exchange rate between Canadian and US currencies.

40. Sweet Dream Confectioners uses the same ingredients as most other producers of chocolate candies. In fact, taste tests suggest that the candy itself, while quite good, isn’t much better than other well-known brands of chocolate. However, the company wraps its candies in expensive looking foil and places them in very attractive boxes. It promotes its products in advertisements as “”the ultimate in chocolate experience.”” Sweet Dream charges a much higher price than most competitors, but sales continue to grow. This success indicates that:

A) consumers often behave in an irrational manner.

B) there is more to the total product offer than the physical product.

C) consumers seldom consider price when making a buying decision for goods such as chocolate.

D) chocolate is best classified as a convenience good.

41. Which of the following statements about packaging is the most accurate?

A) Changes in packaging can improve the product itself and open up large new markets.

B) Packaging is the least critical element of a firm’s promotional strategy.

C) Technology has not changed the role of packaging.

D) Packaging has avoided federal regulations.

42. Yahoo once provided an auction service free in competition with eBay. Why would they give such a service away free?

A) To create an image.

B) To achieve a target return on investment or profit.

C) To further social objectives.

D) To build traffic.

43. Angie owns a small company that markets high quality office supplies to businesses. Angie faces stiff competition from some much larger firms. Which of the following competitive strategies would probably work best for Angie?

A) Keep costs as low as possible by offering a no-frills approach with little or no extra services.

B) Develop a skimming pricing strategy.

C) Utilize a high-low approach to pricing.

D) Focus on offering better service to customers and work on building good customer relationships.

44. Sharp Focus Cameras is facing intense competitive pressure. Top marketing managers are looking for ways to cut costs. They are considering a plan to cut distribution costs by eliminating marketing intermediaries from the channel of distribution. If Sharp Focus carries out this plan, it is likely to find that:

A) most of the marketing functions performed by marketing intermediaries are helpful, but they aren’t really necessary.

B) as the producer of the products, it will be able to perform the same functions more efficiently.

C) it will be unable to perform the functions as efficiently as they were performed by the marketing intermediaries.

D) telemarketing will become the only viable means of distributing its products.

45. Which of the following strategies is likely to be the best alternative for small retailers trying to compete against “”category killer”” stores?

A) Seek changes in zoning ordinances to limit the size of retail stores.

B) Concentrate on offering a greater selection within a smaller, more specialized category of items.

C) Work out arrangements with rack jobbers and administered system wholesalers to have them provide most of the marketing functions.

D) Form a retail cooperative with other small firms to offer a wide variety of goods.

46. All of the following are examples of consumers making purchases through a direct marketing arrangement except the purchase of:

A) a box of cereal at a local grocery store with a coupon on the box.

B) software through an online shopping service.

C) a set of towels featured in a department store catalog using a toll free number.

D) a book on the history of Canada by sending in an order form attached to a pamphlet sent to the customer by the publisher.

47. Bonnie faces the challenge of developing the promotion mix for a new business. Given the uniqueness of the new products and a very limited budget, Bonnie confronts a creditability problem. She realizes that the promotional messages of an unknown firm may be met with skepticism. Bonnie should consider:

A) publicity to help create a positive image for her firm and their products.

B) the extensive use of persuasive advertising.

C) emphasizing personal selling rather than public relations.

D) changing jobs because this situation is hopeless.

48. Consumer research indicates that the public is very concerned about underage drinking. In response, Texas Brewing Company has created a web site providing parents with information to help avoid underage drinking in their families. The firm also provides materials to retailers to help train their employees to avoid sales to minors. Publicizing these efforts:

A) will likely backfire, since few people will believe a beer company would seriously support a program that would reduce their sales.

B) represents a key step in a good public relations program.

C) illustrates a push strategy applied to public relations.

D) would distract the firm from its primary mission of selling beer to adults.

49. In the article, “”Customer relationship management (CMT) done right””, the central theme is,

A) there is a necessary set of steps to follow in properly implementing a CMT system.

B) CMT will always improve the profits of your company.

C) CMT can rarely be employed on a company wide basis, as you rarely will get everyone in the company to agree to use this tool.

D) It has been proven that CMT does little to improve the profits of your company.

50. One of the realities that businesses have to deal with if they choose to increase their research and development expenditures is they,

A) will lose their competitive edge.

B) have to spend money on research and development before they earn money from the sale of new products or services.

C) have to choose which of the new products or services to sell given that all their research and development efforts will result in marketable products or services.

D) will end up new products or services that are marketable only locally.