NameMGT 190 Exam 2

Question 1

The probability of collecting an outstanding account receivable __________ the longer

the account remains outstanding.

a. increases

b. decreases

c. remains constant

d. none of the above

Question 2

A radio ad in which of the following time slots would be most expensive?

a. 10 am to 4 pm

b. 4 pm to 7 pm

c. 7 pm to midnight

d. 6 am to 10 am

Question 3

Although banner ads produce a click-through rate of just __________ percent, they remain a popular form of advertising on the World Wide Web

a. less than 10

b. 10 to 25

c. 25 to 50

d. more than 50

Question 4

A times interest earned ratio that is well above the industry average indicates that:

a. A company is carrying a debt load that is excessive.

b. A company would be able to meet the interest payments on its debt with little or no difficulty.

c. A company represents a high credit risk to bankers and other lenders because of the likelihood of defaulting on its debts.

d. All of the above.

Question 5

In the __________ stage of the product life cycle, sales volume continues to rise, but profit margins peak and then begin to decline as competitors enter the market.

a. growth and acceptance

b. maturity

c. saturation

d. decline

Question 6

Only _____ percent of a typical business's inventory turns over quickly.

a. 10

b. 20

c. 30

d. 40

Question 7

About 20 percent of the typical company's customers account for about __________

percent of its sales.

a. 20

b. 50

c. 65

d. 80

Question 8

__________ is a technique in which a business marks down the customary price of a popular item in an attempt to draw more customers.

a. leader pricing

b. price lining

c. uniform delivered pricing

d. bundling

Question 9

Studies show that businesses typically waste __________ percent of the time it takes to

produce products and services without ever realizing it.

a. 10 to 20

b. 35 to 50

c. 65 to 80

d. 85 to 99

Question 10

A marketing plan should:

a. determine customer needs and wants through market research.

b. pinpoint the specific target markets a company will serve.

c. analyze a firm's competitive advantages and build a marketing strategy around them.

d. create a marketing mix that meets customer needs and wants

e. all of the above.

Question 11

Many creditors look for a times interest earned ratio of at least _____ before

pronouncing a company a good credit risk.

a. 1:1

b. 2.5:1

c. 4:1

d. 10:1

Question 12

Approximately __________ percent of industrial and wholesale sales are on credit

a. 40

b. 55

c. 70

d. 90

Question 13

Markup is:

a. the difference between the cost of a good or service and its selling price.

b. the variable expenses required to produce a product divided by the sales revenue it generates.

c. the sum of a product's fixed costs per unit and its variable costs per unit.

d. the portion of a product's sales price that is left over to contribute to covering its variable expenses and earning a profit after deducting its fixed expenses.

Question 14

Most "bounced" checks occur because:

a. of fraud.

b. nine out of ten customers fail to keep their checkbooks balanced.

c. of bank errors.

d. none of the above.

Question 15

Which of the following statements concerning pricing is true?

a. When setting prices, small business owners must track competitors' prices on similar or

identical products and services and so they can either match them or beat them.

b. For small companies, especially those competing against large businesses, offering

lower prices is the best way to gain a competitive advantage.

c. The prices business owners set for their companies' goods and services send clear signals to customers about quality, value, and image.

d. All of the above.

Question 16

Which of the following is not an advantage of newspaper advertising?

a. Short closing times for advertising copy.

b. Low costs.

c. Rapidly rising readership rates.

d. Flexibility in the size, location, and timing of advertisements.

Question 17

To be most effective an outdoor ad should:

a. use fancy, upper-case letters in bold print to attract attention.

b. be located on the left side of the highway where they will produce the highest recall

scores among viewers.

c. emphasize simplicity, using short words and short ad copy to get noticed.

d. All of the above.

Question 18

The __________ is a "moving picture" of a company's profitability over a specific time

period that compares its expenses against its revenue to show net profit (or loss).

a. income statement

b. balance sheet

c. statement of cash flows

d. debt ratio

Question 19

A __________ pricing strategy for a new product or service maintains a relatively low profit margin so that a company can gain its quick acceptance into the market and

quickly achieve a high volume of sales.

a. penetration

b. skimming

c. sliding down the demand curve

d. cyclical

Question 20

A bank account that automatically moves fund from checking to an interest-bearing account is called a(n):

a. money market account.

b. zero balance account.

c. sweep account.

d. asset management account.

Question 21

Which of the following statements concerning advertising is false?

a. With creativity and ingenuity, a small company can make its advertising voice heard above the clamor of its larger competitors and still stay within a limited budget.

b. Advertising is a "luxury" expense that small companies should consider only after they have covered all of their other expenses.

c. Without a steady advertising and promotion budget, a small company?s customer base will soon dry up.

d. Because of many factors, including overwhelming ad clutter, increasingly fragmented audiences, and more skeptical consumers, companies have had to become more creative in their advertising and promotional campaigns.

Question 22

__________ are television viewers who flash from one channel to another, especially during commercials, posing a real threat to TV advertisers.

a. Flashers

b. Zappers

c. Spammers

d. Jammers

Question 23

When it comes to preparing a business plan, entrepreneurs:

a. should hire professional business plan writers to write their plans.

b. must recognize that because every business is unique, every business plan must be tailor-made.

c. should prepare a document that is at least 100 pages in length to prove to potential

lenders and investors that they are well-prepared.

d. All of the above.

Question 24

Small businesses should maintain a current ratio of at least:

a. 1:1

b. 2:1

c. 4:1

d. 10:1

Question 25

Blending show business with the retail business, Golf Galaxy offers its customers a variety of fun features, including an in-store putting green, a driving range, and a golf simulator that lets golfers "play" any one of 32 world-famous courses, no matter what the weather outside is. Golf Galaxy is using which principle of guerrilla marketing?

a. demographic analysis

b. entertailing

c. data mining

d. time compression management

Question 26

The most common channel of distribution for consumer goods is:

a. manufacturer to consumer

b. manufacturer to retailer to consumer

c. manufacturer to wholesaler to retailer to consumer

d. none of the above

Question 27

Approximately __________ percent of the average company's sales come from existing customers.

a. 20

b. 40

c. 50

d. 70

Question 28

The first step in conducting market research is:

a. collecting the data

b. analyzing the data

c. defining the problem

d. buying a mailing list from a list broker

Question 29

A company's contribution margin is:

a. the portion of total revenue that remains after covering fixed costs to contribute toward meeting variable expenses and earning a profit.

b. the difference between sales revenue and total fixed expenses.

c. the portion of total revenue that remains after covering variable costs to contribute toward meeting fixed expenses and earning a profit.

d. the difference between sales revenue and variable expenses.

Question 30

Stop 'N Shop, a small convenience store, is running a special sale on candy bars from a particular maker. The candy bars normally sell for 50 cents each, but Stop 'N Shop is pricing them at "4 for $1.75" for a limited time. Stop 'N Shop is using which pricing


a. zone pricing

b. price lining

c. multiple pricing

d. cash discount

Question 31

Data mining is:

a. the process of tracking shoppers? behavior on the World Wide Web.

b. a process in which business owners purchase market research from external sources and then sorts through it to find the information that they can use to identify their target


c. a process in which computer software that uses statistical analysis, database technology, and artificial intelligence finds hidden patterns, trends, and connections in data so that business owners can make better marketing decisions and predictions about customers behavior.

d. None of the above.

Question 32

Which of the following factors must a business owner consider when setting the final price for goods and services?

a. what the product or service cost

b. competitors' prices

c. the company's desired image in the market

d. All of the above

Question 33

A business plan:

a. should be at least 50 pages long to prove to potential lenders and investors that an entrepreneur has researched the business opportunity thoroughly.

b. should follow a standard format so that potential lenders and investors know where to find what they are looking for.

c. does not guarantee success, but it does improve the chance of succeeding.

d. all of the above

Question 34

Which one of the "five C's of credit" is a synonym for cash flow?

a. capacity

b. collateral

c. conditions

d. capital

Question 35

The breakeven point:

a. tells an entrepreneur the level of operation (in sales dollars or in production quantity) at which a business neither earns a profit nor incurs a loss.

b. shows the minimum level of activity required to keep a business in operation.

c. occurs where sales revenue equals total expenses.

d. all of the above.

Question 36

Although small companies account for 50 percent of all retail sales in the United States, they account for __________ percent of all online sales.

a. 9

b. 15

c. 25

d. 35

Question 37

An effective market analysis in a business plan should include:

a. a clear definition of the company's target market.

b. the types of advertising and promotional campaigns that will reach the intended

audience most effectively and efficiently.

c. market size and trends.

d. all of the above.

Question 38

High prices and low perceived quality create a(n) ______ image.

a. contradictory

b. upscale

c. bargain

d. value

Question 39

Under the __________ approach to establishing an advertising budget, a business owner sees advertising completely as an expense, not as an investment that produces sales and profits in the future.

a. what-is-affordable

b. percentage of sales

c. matching competitors

d. objective-and-task

Question 40

The __________ ratio expresses the relationship between the capital contributions to a company from its creditors and those of its owners; it measures what a business

"owes" to what it "owns."

a. current

b. debt

c. debt to net worth

d. times interest earned

Question 41

The "big three" of cash management are:

a. sales, accounts receivable, and accounts payable

b. sales, inventory, and net income

c. inventory, accounts payable, and accounts receivable

d. accounts payable, accounts receivable, and sales

Question 42

When describing the company's products or services in a business plan, entrepreneurs should focus on the product's or service's:

a. features

b. price

c. benefits

d. physical characteristics

Question 43

The two-thirds rule says that:

a. only two-thirds of the entrepreneurs with a viable business venture will find financial backing.

b. of those entrepreneurs who get financing will get just two-thirds of what they initially


c. getting the financing to start a business will take entrepreneurs two-thirds longer than

they expected.

Take Assessment: MGT 190 Exam 2

9 of 17 2/27/15, 3:14 PM

d. all of the above

Question 44

__________ estimates the sales revenue a company would lose by measuring the percentage of customers who would leave because of poor service.

a. Data mining

b. Customer sensitivity analysis

c. Customer alignment

d. Revenue at risk

Question 45

To calculate the breakeven point, a business owner should use which of the following formulas?

a. total variable expenses / contribution margin as a percentage of sales

b. total fixed expenses / contribution margin as a percentage of sales

c. (total revenue - total expenses) / total revenue

d. contribution margin as a percentage of sales / total expenses

Question 46

The price range for a product or service is:

a. the final price a business owner establishes for a product or service, taking into account

the company's desired image in the market.

b. a function of a single factor: the prices competitors set for similar goods and services.

c. the area between the price ceiling defined by customers in the market and the price

floor defined by a company's cost structure.

d. the area between the price floor set by a company's cost structure and the price ceiling

determined by the prices competitors set for similar goods and services.

Question 47

The __________ is the first section in a business plan, but it is the last section to be written.

a. company history

b. list of goals and objectives

c. marketing strategy

d. executive summary

Question 48

The executive summary section of a business plan:

a. presents a synopsis of the business plan.

b. is a written version of the entrepreneur?s "elevator pitch."

c. must capture the reader's attention so that he or she will read the rest of the plan.

d. All of the above.

Question 49

A company whose sales are equal to the breakeven sales will earn:

a. a loss.

b. neither a loss nor a profit.

c. a profit.

d. Cannot say from the information given.

Question 50

A survey by the Yellow Pages Publishers Association found that _____ percent of businesses had received bogus bills for Yellow Pages advertising.

a. 20

b. 33

c. 50

d. 80

Question 51

Proving that a profitable market exists involves two steps:

a. showing customers exist and documenting their buying power.

b. showing customers are interested and documenting market claims.

c. showing customer demographics and documenting the buying cycle.

d. showing customer locations and documenting their average income.

Question 52

Numerous customer surveys across a variety of industries show that ___________ is the most important element of service.

a. the personal touch businesses offer them

b. technology

c. convenience

d. quality

Question 53

Inventory represents the largest investment for most businesses.



Question 54

Quantitative data from the entrepreneur's market research form the basis of the financial projections throughout the business plan.



Question 55

When the typical customer encounters rude or discourteous service from a company,

he or she

a. does not complain.

b. does not buy from that business again.

c. tells other people about his or her bad experience with that business.

d. all of the above

Question 56

A company's cash flow cycle:

a. should be as long as possible to make the most efficient use of its cash.

b. is the time lag between paying suppliers for merchandise and collecting payment from customers after selling it.

c. usually tracks the company's cycle of profitability.

d. all of the above.

Question 57

The worst mistake entrepreneurs make when defining the marketing strategy for their companies is:

a. being overly specific when defining the target customers at whom they are aiming their products and services.

b. budgeting an excessive amount of money for marketing and advertising.

c. overwhelming potential lenders and investors with an excessive amount of detail about their marketing targets and strategies.

d. failing to define their target market clearly and trying to make their businesses "everything to everybody."

Question 58

In a price war:

a. entrepreneurs usually overestimate the power of price cuts to attract and retain customers.

b. sales volume rarely rises enough to offset the lower profit margins associated with a lower price.

c. customers lured by lower prices usually have very little loyalty toward a business.

d. All of the above.

Question 59

A small music store sets the prices of most of its CDs at three levels: $12.99, $14.99, and $16.99, even using brightly-colored labels to indicate each price level. This music

store is using:

a. leader pricing

b. price lining

c. uniform delivered pricing

d. bundling

Question 60

Which of the following is a basic principle for creating a guerrilla marketing plan?

a. Find a niche and fill it

b. Don't just sell; entertain.

c. Connect with customers on an emotional level.

d. All of the above

Question 61

In __________ advertising, a manufacturing company shares the cost of advertising with a small retailer if the retailer features its products in those ads.

a. cause

b. shared

c. cooperative

d. conjunctive

Question 62

__________ involves the exchange of goods and services for other goods and services rather than for cash and is an effective way to conserve valuable cash.

a. Speculation

b. Arbitrage

c. Barter

d. Leasing

Question 63

The ideal average inventory turnover for a small company:

a. is 5 times per year.

b. should be as low as possible if a business is to maximize its profitability.

c. depends on the type of business involved, its size, its profitability, marketing strategy, and other factors.

d. none of the above.

Question 64

Which of the following is not an effective way to improve the level and quality of customer service in a company?

a. When you create a dissatisfied customer, fix the problem fast.

b. Discourage customers from complaining; giving them the chance to verbalize their complaints only alienates them more.

c. Ask employees for ideas on how to improve customer service; studies show that

front-line workers can predict nearly 90 percent of the cases that produce customer


d. None. All of the above are effective ways to improve the level and quality of customer

service in a company?

Question 65

Breakeven volume equals:

a. Total Variable Costs / (Sales Price per Unit - Variable Costs per Unit)

b. Total Fixed Costs / (Sales Price per Unit - Variable Costs per Unit)

c. Fixed Costs per Unit / (Sales Price per Unit - Variable Costs per Unit)

d. Variable Costs per Unit / (Sales Price per Unit - Fixed Costs per Unit)

Question 66

To capitalize on the diversity that the domestic market provides, small businesses should:

a. use a "shotgun approach" to marketing, firing marketing blasts at every potential customer they see, hoping to capture some of them.

b. pursue a "one-size-fits-all" marketing approach designed to appeal to the mass market so that they can reach as many potential customers as possible.

c. follow a "rifle approach" to marketing, focusing on narrow market segments and taking the time to recognize, understand, and cater to the specific needs of each segment.

d. try to outspend their competitors in advertising, promotional, and marketing campaigns.

Question 67

Given the following comparisons between the ratios for Marion's Hardware and those

for the typical firm in the industry (measured by the industry median), which of the

following statements is false? Marion's Hardware Industry Median Current ratio 1.96:1

1.84:1 Debt to net worth 2.48:1 1.75:1 Average inventory turnover ratio 2.20 per year

4.7 per year Net profit on equity ratio 19.72% 11.38%

a. Marion's Hardware should have no trouble paying its short-term debt; the company's liquidity appears to be sound.

b. Inventory is moving through Marion's Hardware slowly compared to the industry average. The owner should find out what is causing this problem before it threatens the business.

c. Because Marion's Hardware is not overburdened with debt, the company would find it very easy to borrow money, especially from traditional loan sources such as banks.

d. Marion's Hardware appears to suffer from undercapitalization; that is, the owners have not invested enough of their own money in the company and must rely on creditors for financing.

Question 68

A business plan that an entrepreneur is planning to present to someone outside the company should:

a. be visually appealing, including color charts, figures, and diagrams to illustrate key


b. be free of spelling and grammatical errors.

c. include a table of contents that makes it easy for the reader to navigate the plan.

d. all of the above.

Question 69

What are the characteristics of my customers . . . their ages, education levels, income,gender, marital status, and other features?" Questions such as these address which

type of marketing information?

a. geographic

b. demographic

c. psychographic

d. monolithic

Question 70

Billing a portion of customers each day or week, instead of billing all customers all at once:

a. is called cycle billing.

b. may smooth out cash receipts.

c. is called cycle billing and may smooth out cash receipts.

d. None of the above.

Question 71

__________ is any sales presentation that is nonpersonal in nature and is paid for by an identified sponsor.

a. publicity

b. personal selling

c. advertising

d. promotion

Question 72

The owner of a small dry cleaners sponsored a community event in which he offered to take in winter coats donated by customers, clean them at no cost, and then distribute them to the needy through a local charity dedicated to helping needy people in the community. This business owner was using:

a. cooperative advertising

b. cause marketing

c. shared advertising

d. event relations

Question 73

When making a business plan presentation, an entrepreneur should:

a. plan to have at least one hour to explain the business, its benefits and its value.

b. explain in detail the technology or the mechanics behind the product or service and the effort and time required to develop it.

c. Use visual aids to punctuate the presenter's spoken message and to focus the audience's attention on the most important points.

d. All of the above.

Question 74

The __________ ratio measures the percentage of a company's sales that remains as profit after paying all of its expenses.

a. current

b. quick

c. net profit on sales

d. net profit to equity

Question 75

To minimize bad debt losses, small business owners should:

a. screen customers carefully before granting them credit.

b. ask customers to complete a detailed credit application that will enable business owners to judge their creditworthiness.

c. check customers' credit references.

d. establish a firm credit-granting policy and inform every customer in advance of their companies' credit terms.

e. All of the above.

Question 76

The Downtown Hobby Shop expects net daily sales of $1200, with the cost of goods sold at $750 and total expenses of $250. Variable expenses, including cost of goods sold, is estimated at $800, with fixed expenses of $200. What is the contribution margin?

a. 33%

b. 25%

c. 27%

d. 75%

Question 77

The role of cash __________ is an entrepreneur's first and foremost responsibility as a company's cash manager and is an on-going job, not a one-time task.

a. finder

b. planner

c. collector

d. conserver

Question 78

The first and most important function a business plan serves is:

a. guiding a startup company's operations by charting its future course and devising a strategy for following it.

b. attracting money from lenders and investors.

c. convincing suppliers to sell to a startup company on credit.

d. to attract customers and clients who otherwise would not consider doing business with

a startup company.

Question 79

A low net sales to working capital ratio indicates the firm is not using its working capital efficiently.



Question 80

The __________ cost of an advertisement measures its cost per potential customer reached.

a. absolute

b. relative

c. differential

d. parametric