Business Studies Final Exam Review – Key Questions and Solutions.

Business Studies Final Exam Review – Key Questions and Solutions. an organization that strives for a profit by providing desired goods + services Business tangible items manufactured by businesses goods intangible offerings of business services the output of goods and services people can buy with the money they have standard of living general level of human happiness quality of life A market structure in which many firms offer products that are close substitutes and in which entry is relatively easy. monopoly A market structure in which a few firms produce most or all of the output and in which large capital requirements or other factors limit the number of firms. Oligopoly the quantity of a good or service that people are willing to buy at various prices. The higher the price, the lower the quantity demanded, and vice versa demand the quantity of a good or service that businesses will make available at various prices. The higher the price, the greater the number of jackets a supplier will supply, and vice versa supply commodities that are useful inputs in their natural state natural resources the economic contributions of people working with their minds and muscles labor tools, machinery, equipment, and buildings used to produce goods and services and get them to the consumer capital combine the inputs of natural resources, labor, and capital to produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal entrepreneurship In a market economy, buying decisions are made by consumers. true If heavy competition for a product keeps its price low, businesses will be very motivated to offer the product for sale. true The US could best be characterized as a command economy. false based on competition in the marketplace and private ownership of the factors of production (resources) capitalism the government owns virtually all resources and controls all markets communism the basic industries are owned by the government or by the private sector under strong government control socialism the use of multiple systems combined mixed economy a business that is established, owned, and operated by that one person. Sole proprietorship An association of two or more individuals who agree to operate a business together for profit partnership Legal entity subject to the. laws of the state in which it is formed, where the right to operate as a business is issued by state character corporations Partnerships, there are two types which are general and limited, all partners share in the management and profits sharing the load A form of business organization based on a business arrangement between a franchisor, which supplies the product or service concept, and the franchisee, who sells the goods or services of the franchisor in a certain geographic area. franchising The purchase of a target company by another corporation or by an investor group typically negotiated with the target company board of directors acquisition A group of people elected by the stockholders to handle the overall management of a corporation, such as setting major corporate goals and policies, hiring corporate officers, and overseeing the firm's operations and finances. Board of directors A group of cooperative members who unite for combined purchasing power. Buyer cooperative A merger of companies in unrelated businesses; done to reduce risk. Conglomerate merger A contract setting out the terms of a franchising arrangement, including the rules for running the franchise, the services provided by the franchisor, and the financial terms. Under the contract, the franchisee is allowed to use the franchisor's business name, trademark, and logo. Franchising agreement In a franchising arrangement, the individual or company that sells the goods or services of the franchisor in a certain geographic area. Franchisee In a franchising arrangement, the company that supplies the product or service concept to the franchisee. Franchisor Partners who have unlimited liability for all of the firm's business obligations and who control its operations general partners A partnership in which all partners share in the management and profits. Each partner can act on behalf of the firm and has unlimited liability for all its business obligations. general partnership Partners who have unlimited liability for all of the firm's business obligations and who control its operations. horizontal merger Two or more companies that form an alliance to pursue a specific project, usually for a specified time period. joint venture A corporate takeover financed by large amounts of borrowed money; can be started by outside investors or the corporation's management. leveraged buyout A hybrid organization that offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation. limited liability company Partners whose liability for the firm's business obligations is limited to the amount of their investment. They help to finance the business but do not participate in the firm's operations. limited partner A partnership with one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is limited to the amount of their investment in the company. limited partnership The combination of two or more firms to form one new company. merger An association of two or more individuals who agree to operate a business together for profit. partnership Individual producers who join together to compete more effectively with large producers. seller cooperative The owners of a corporation who hold shares of stock that carry certain rights. stockholders (shareholders) A merger of companies at different stages in the same industry; done to gain control over supplies of resources or to gain access to different markets. vertical merger Creates specific standards, methods, policies, and procedures that are used in specific functional areas of the organization. operational planning Involves creating long-range (one to five years), broad goals for the organization and determining what resources will be needed to accomplish those goals. strategic planning Tactical plans have a shorter (less than one year) time frame than strategic plans and more specific objectives designed to support the broader strategic goals tactical planning identify alternative courses of action for very unusual or crisis situations. contingency planning in president to low workers. (Line organization small business and vs line and staff organization bigger corporations.) structure of a business Matrix structures, the matrix structure (also called the project management approach) is sometimes used in conjunction with the traditional line-and-staff structure in an organization. This structure combines two different forms of departmentalization, functional and product, that have complementary strengths and weaknesses. The matrix structure brings together people from different functional areas of the organization (such as manufacturing, finance, and marketing) to work on a special project. contemporary structures authority and responsibility are held by a group rather than an individual. Committees are typically part of a larger line- and-staff organization. Often the committee's role is only advisory, but in some situations the committee has the power to make and implement decisions. committee structures one of the most apparent trends in business today is the use of teams to accomplish organizational goals. Using a team-based structure can increase individual and group motivation and performance. This section gives a brief overview of group behavior, defines work teams as specific types of groups, and provides suggestions for creating high-performing teams Using teams to enhance motivation and performance refers to the degree to which group members want to stay in the group and tend to resist outside influences (such as a change in company policies). group cohesiveness share resources and coordinate efforts to help members better perform their individual duties and responsibilities. The group's performance can be evaluated by adding up the contributions of the individual group members. work groups require not only coordination but also collaboration, the pooling of knowledge, skills, abilities, and resources in a collective effort to attain a common goal. work teams are typically made up of employees from the same department or area of expertise and from the same level of the organizational hierarchy. problem solving teams highly autonomous group.. They manage themselves without any formal supervision, taking responsibility for setting goals, planning, and scheduling work activities, selecting team members, and evaluating team performance. self managed teams An adaptation of the team concept. These teams are made up of employees from about the same hierarchical level but different functional areas of the organization. cross functional team Establishing Organizational Relationships Authority (also called the management pyramid) is defined by the levels of management within an organization. The General management structure has three levels: top, middle, and supervisory management. managerial hierarchy An organization with a well-defined hierarchy has a, which is the line of authority that extends from one level of the organization to the next, from top to bottom, and makes clear who reports to whom. clear chain of command is legitimate power, granted by the organization and acknowledged by employees, that allows an individual to request action and expect compliance. authority makes the employees accountable to their supervisor. Accountability means responsibility for outcomes delegation of authority A manager's (sometimes called span of management) is the number of employees the manager directly supervises. It can be as narrow as two or three employees or as wide as 50 or more. span of control is the degree to which formal authority is concentrated in one area or level of the organization. In a highly centralized structure, top management makes most of the key decisions in the organization, with little input from lower-level employees. Degree of Centralization: Centralization is the process of pushing decision-making authority down the organizational hierarchy, giving lower-level personnel more responsibility and power to make and implement decisions. Benefits of decentralization can include quicker decision-making, increased levels of innovation and creativity, greater organizational flexibility, faster development of lower-level managers, and increased levels of job satisfaction and employee commitment. But decentralization can also be risky. Decentralization The network of connections and channels of communication based on the informal relationships of individuals inside the organization is known as the . Informal relationships can be between people at the same hierarchical level or between people at various levels and in different departments informal organization Managers must learn to use the existing informal organization as a tool that can benefit the . An excellent way of putting the informal organization to work for the good of the company is to bring informal leaders into the decision-making process. That way, at least the people who use and nurture the grapevine will have more accurate information to send it. formal organization is the body of unwritten law that has evolved out of judicial (court) decisions rather than being enacted by legislatures. It is also called case law. common law is written law enacted by legislatures at all levels, from city and state governments to the federal government. Examples of statutory law are the federal and state constitutions, bills passed by Congress, and ordinances, which are laws enacted by local governments. statuary law Related to statutory law, or the rules, regulations, and orders passed by boards, commissions, and agencies of federal, state, and local governments. Administrative law sets forth the rules that apply to commercial transactions between businesses and between individuals and businesses. the uniform commercial code (UCC) This branch of government, is responsible for settling disputes by applying and interpreting points of law. the judiciary Most court cases start in, also called courts of general jurisdiction. The main federal trial courts are the U.S. district courts. trial courts The losing party in a civil (noncriminal) case and a losing defendant in a criminal case may appeal the trial court's decision to the next level in the judicial system the appellate courts (courts of appeals) is the highest court in the nation. It is the only court specifically established by the U.S. Constitution. Any cases involving a state or in which an ambassador, public minister, or consul is a party are heard directly by the supreme court have limited judicial powers to regulate their special areas. These agencies exist at the federal, state, and local levels. administrative agencies Nonjudicial Methods of Settling Disputes Settling disputes by going to court is both expensive and time-consuming. Even if the case is settled prior to the actual trial, sizable legal expenses can be incurred in preparing for trial. Contract Law is an agreement that sets forth the relationship between parties regarding the performance of a specified action. The contract creates a legal obligation and is enforceable in a court of law. contract Contract Requirements Businesses deal with contracts all the time, so it's important to know the requirements of a valid contract. Mutual assent, capacity, consideration, legal purpose, legal form Voluntary agreement by both parties to the terms of the contract. mutual assent Legal ability of a party to enter into contracts. Under the law, minors (those under 18), mental incompetents, drug and alcohol addicts, and convicts cannot enter into contracts. capacity Exchange of some legal value or benefit between the parties. consideration Absence of illegality. The purpose of the contract must be legal for it to be valid. legal purpose Oral or written form, as required. Many contracts can be oral. legal form occurs when one party to a contract fails (without legal excuse) to fulfill the terms of the agreement. breach of contract breach of contract payment of damages, specific performance of the contract, restitution . Money awarded to the party who was harmed by the breach of contract, to cover losses incurred because the contract wasn't fulfilled. payment of damages A court order requiring the breaching party to perform the duties under the terms of the contract. specific performance of the contract Canceling the contract and returning to the situation that existed before the contract. restitution are specific statements of fact or promises about a product by the seller. This form of is considered part of the sales transaction that influences the buyer. express warranties, warranty What are the 4 characteristics of money? scarcity, durability, portability, divisibility What are the different types of currency in the money supply? coins, paper, and checks What are the 2 types of deposits in the money supply? demand deposits and time deposits consist of money kept in checking accounts that can be withdrawn by depositors on demand include regular checking accounts as well as interest bearing and other types of checking accounts demand deposits deposits at a bank or other financial institution that pay interest but can not be withdrawn on demand include savings accounts, money market deposit accounts, and certificates of deposit time deposits M1 The total amount of readily available money in the system; includes currency and demand deposits. M2 Includes all M1 monies plus time deposits and other money that is not immediately accessible. What are the 4 important responsibilities that the Federal Reserve has? Carrying out monetary policy, setting rules on credit, distributing currency, and making check clearing easier. What is the selective credit control power of the Federal Reserve? Controls the credit terms on some loans made by banks and other lending institutions. Includes consumer credit rules and margin requirements. What is the process of financial intermediation? Financial institutions act as intermediaries or go betweens between the suppliers and demanders of funds. The institution accept savers' deposits and invest them in financial products (such as loans) that are expected to produce a return. What are the 3 principles tools that the Federal Reserve has? setting reserve requirements, operating the discount window and other credit facilities, and conducting open-market operations What is the difference between commercial banks and thrift institutions? The biggest difference between a thrift and a conventional bank is that thrifts are designed to serve U.S. consumers rather than businesses. Which of the following statements about the Federal Deposit Insurance Corporation is true? 1. Each bank insured by the FDIC pays a fixed percentage of the bank's domestic deposit as its premium. 2. The FDIC reviews the financial records and management practices of banks it insures at least once a year. 3. The ceiling on the size account insured by the FDIC is $250,000. 4. All of the above statements about the FDIC are true. 4. What are some technological trends in the banking industry? Fintech, mobile financial apps, banking apps, online payment platforms It retains its value over time, although it may lose some of its purchasing power due to inflation store of value Money makes transactions easier medium of exchange With a form of money whose value is accepted by all, goods and services can be priced in standard units. Makes it easy to measure the value of products and allows transactions to be recorded in consistent terms. Standard of value