BUSN 1010 Exam Review 1 PDF

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Chapter 1-5 review of terms from the Understanding Business Twelfth Edition textbook. Includes definitions and key concepts of vocabulary terms....

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BUSN 1010 Business Enterprise Exam Review 1 Chapter 1: Taking Risks and Making Profits Within the Dynamic Business Environment 1. Risk: Risk is the likelihood of loss or reduced profit. The amount of risk taken directly correlates to the amount of profit gained. 2. Calculate a profit/loss: To calculate a profit or loss, a business takes their revenue and subtracts their expenses. If the answer is positive, they have earned a profit. However, if the answer is negative, they have created loss which occurs when the expenses are more than the revenue. 3. Insourcing: Other countries conduct business in the United States. This creates jobs and balances out jobs that are lost due to outsourcing. 4. Impact that businesses have on a society: The communities around a business are part of that business’ stakeholders. A business needs to meet the needs of their stakeholders. This could include being environmentally safe, treating their employees well, and giving back to society. 5. Factors of production: Land, labor, capital, entrepreneurship and knowledge. 6. Two most important factors of the factors of production: Entrepreneurship and knowledge are the most important when it comes to creating wealth. 7. Benefits of technology: Technology makes businesses more effective, efficient and productive. It also allows for e-commerce which can make businesses more accessible. 8. Green movement: Business switch to products and energy sources that are less harmful to the environment. Many customers want the businesses they buy from to be green. This movement has opened up many opportunities to businesses that can make green technology. 9. Globalization: Free trade among nations has created global competition. This has improved the living standards world wide. Globalization has also improved communications. All of this has created a global economy. Chapter 2: Understanding Economics It Affects Business 1. Theory of the invisible hand: Those who set out to achieve wealth often tend to help the economy grow through the goods and services that they provide. Paying employees and buying from vendors are two examples of how a business helps economic growth without directly trying to. 2. Economics: The study of using scarce resources to produce goods or services and distribute them throughout groups or individuals. 3. Macroeconomics: The broad look at a country’s economy as a whole unit.

4. Microeconomics: The specific look at certain markets and the behavior of those in them producing the goods and services. 5. Shortage: Occurs when there is more supply demanded than products available. This increases the price of the product. The quantity demanded is greater than quantity supplied. 6. Oligopoly: A few sellers dominate a market creating fewer choices, less innovation and high prices. 7. Monopolistic competition: A large number of sellers with perceived differences of products that are very similar. 8. Issues with capitalism: Some issues with capitalism are the large gaps between incomes, less help for disabled or poor or less social programs, and less is done to help the environment. 9. Producer Price Index (PPI): An index that measures the changes in prices at wholesale. Chapter 3 – Doing Business in Global Markets 1. Two leading exporting nations: China and Germany are the two highest exporting nations, with the U.S. being the third highest. 2. Exporting: Selling goods and products to other nations. The U.S. is the third largest exporting nation. 3. Theory of Comparative Advantage: A country should export the goods and services that they produce efficiently and import the goods and services they don’t have the ability to make or can’t produce as efficiently. 4. Absolute Advantage: A country can produce a specific product more efficiently than any other. Tends to deal with natural resources. 5. Trade Surplus: Occurs when a country exports more than it imports. This is a favorable balance of trade. 6. Dumping: A foreign country will dump products below market price. This makes it difficult for competitors to compete in that marketplace. 7. Foreign Corrupt Practices Act: Prohibits “questionable” payments, or bribes, to foriegn officials to secure a business contract. However, this act creates a disadvantage for U.S. companies that have to follow it. This is because in many foreign countries bribery is common and normal in business. 8. Ethnocentricity: The ability to adapt products to a local market place.

Chapter 4 – Demanding Ethical and Socially Responsible Behavior

1. What can be done to restore trust in the free-market system and with leadership: A way to restore trust is to create new laws that make accounting and records more transparent and that punishes wrongdoers. 2. Intentional accounting irregularities: Falsifying information on sheets to mislead the shareholders about the companies profits. 3. Ethical dilemma: Making choices between what you believe is ethical or sometimes what is unethical but can lead to other gains. Sometimes there is not an easy answer because both options can be unpleasing. 4. Ethical Check Questions: ● Is it legal? ● Is it balanced? (Can relate to how a company treats their employees or shareholders.) ● How will it make me feel about myself? 5. CEOs blame unethical behavior on: Lack of training throughout the organization. Failure of leaders to establish ethical behavior and standards. 6. Reason why a business should be managed ethically: Business that are ethical are more successful and profitable in the long run. When a business has an ethical management team, the employees are more likely to behave ethically as well. 7. Following an ethics-based approach to decision making will lead to: Behaving ethical and reaping the rewards of an ethical company, which tends to be more successful than others. 8. Sarbanes-Oxley Act: This act protects whistleblowers, insiders who come forward and report unethical or illegal actions occurring in a company, by allowing all employee’s concerns regarding accounting or auditing to be anonymous and confidential. 9. Compliance-based ethics: A code that emphasizes the prevention of unlawful behavior by punishing or terminating those who don’t follow it. 10. Integrity-based ethics: The general concept of good ethical behavior in a company. Can include treating people fairly and making good ethical decisions all around. 11. Insider trading: Occurs when information about a company isn’t available to the public and is used for private gain. This act is illegal. Chapter 5 – How to Form a Business 1. Debts incurred by a sole proprietorship: If a sole proprietorship fails, the owner carries all the risk. The owner backs up their business with their own assets. 2. Board of directors for a corporation is elected by: Owners or stockholders.

3. Advantage of S corporations: S corps are taxed like a sole proprietorship. They can public if they please and the owners can separate themselves from liability. 4. Leveraged buyout: The management and employees purchase the company and use the assets to back up the loans. 5. Disadvantage of franchising: Starting a franchise comes with very high start-up costs that many people cannot afford. They also have shared royalties. 6. Coattail effect: A franchisee is successful and makes profits but the franchisor is having issues with profits or legal issues....