Chapter 12
MULTIPLE CHOICE CASE 1 (1 Case):
Caroline's Crafts 'N Things
Sarah works for a retail shop called Caroline's Crafts 'N Things. Sarah was often quite rude to customers when they
annoyed her. One morning, her supervisor asked Sarah into her office and informed her that her behavior was
unacceptable. To be rude to one customer could cause several customers not to come back. Sarah's supervisor told her
that retaining a customer is much cheaper than trying to get a new one. After their constructive discussion, Sarah's boss
told her that she wanted her to go out on the floor that day and attempt to be more helpful to customers.
Over the next few months, Sarah began to help customers learn more about the different products in the store and often
explained why the customer might want to purchase one product over another. In doing so, she realized the importance
of her role in the retail shop and began to truly enjoy her job. She started to think about the future of the company. She
even thought that the company could do very well if it were to sell its products on eBay. When she brought this idea to
her boss, her boss thought it was excellent, and asked Sarah to look further into the pros and cons of her idea.
After evaluating Sarah's research, her boss decided to move forward with the idea, asking Sarah to head up this new
venture for the company. Sarah then realized that retail is not just about making the sale; the customer should be the
focus of all operations. Sarah now looks up to her boss, and is very glad that she was there to mentor her.
15. Refer to Caroline's Crafts 'N Things. When Sarah was brought into her boss's office, what was her manager
trying to explain?
a. Customer motivation
b. Customer lifetime value
c. Disposable income
d. Marketing information system
e. Possession utility
16. Refer to Caroline's Crafts 'N Things. Caroline's purchased its Thanksgiving products in June. However, in
October, when the store finally displays the Thanksgiving products, which form of utility is being provided?
a. Possession
b. Place
c. Market
d. Time
e. Form
17. Refer to Caroline's Crafts 'N Things. Sarah should understand that all of the following are different types of
utilities except
a. form.
b. time.
c. possession.
d. place.
e. market.
18. Refer to Caroline's Crafts 'N Things. Doing business on eBay allows an entrepreneur to
a. develop a business-to-business selling model.
b. develop form utility.
c. create place utility.
d. find out what works, fast.
e. explore producer markets.
1
MULTIPLE CHOICE CASE 2 (1 Case):
Your Best, Inc.
Christie worked for a retail company and noticed there were many things it could do better. She shared some of her
ideas with upper management, but it did not want to do things differently. When Christie went home to talk to her
husband, they both realized that, given her passion, it would be better for Christie to open her own business. After a lot
of consideration, she decided to open a sporting goods store called Your Best, Inc. She also knew just where to open the
storeright next to her house.
To be certain to address all aspects of the business, Christie hired a marketing research firm to determine the best
location. Once all the research was compiled and analyzed, she realized that it would actually be better to open the store
in a different area. She also realized that deciding where to locate the business was not the only major concern. More
specifically, she would have to focus on the four elements of the marketing mix as well, creating a whole marketing
plan. Her husband mentioned the possibility of using online information services to help with the business. With her
husband's support and a good marketing plan, Christie felt that she would be prepared to make the right decisions.
19. Refer to Your Best, Inc. Marketing research involves
a. satisfying customers.
b. determining a target market.
c. creating a product mix.
d. interpreting information.
e. product promotion.
20. Refer to Your Best, Inc. Christie thought about focusing on the four elements of the marketing mix. Which
of the following is one of those elements?
a. Production
b. Price
c. Power
d. Possession
e. Personal income
21. Refer to Your Best, Inc. In preparing a marketing plan, Christie should ensure that all of the following
components are included except a(n)
a. executive summary.
b. SWOT analysis.
c. production schedule.
d. environmental analysis.
e. evaluation and control.
22. Refer to Your Best, Inc. If Christie were to use information services available online, they would offer her
access to which of the following?
a. Databases
b. Financial assistance
c. Physical location
d. Production materials
e. Disposable income
23. Refer to Your Best, Inc. When Christie's business gets going, her income less all additional personal taxes
would be called her
a. business buying behavior.
b. disposable income.
c. IRS imposed income.
d. discretionary income.
e. total loss.
2
MULTIPLE CHOICE (10 Questions):
24. The organizational function and set of processes for creating, communicating, and delivering value to
customers and for managing customer relationships in ways that benefit the organization and its
stakeholders is
a. production.
b. the chain of command.
c. marketing.
d. distribution.
e. dispersion.
32. Sue Wallace is getting married on Saturday. She purchases flowers for the church ceremony early Saturday
morning from a local flower shop. Which of the following types of utility is not created by this activity?
a. Form
b. Place
c. Time
d. Possession
e. Ownership
42. Burlington Coat Factory manufactures its winter jackets in April but does not display them in its stores until
early September. Burlington recognizes the importance of ____ utility.
a. form
b. time
c. production
d. space
e. possession
50. Arthur was a salesperson for a manufacturing firm in the late 1920s. Which of the following would his
employer most likely have asked him to do?
a. Use high-pressure sales technique to sell more of the company's high production output.
b. Nothing, because at this time production lagged well behind customer demand.
c. Simply take orders from customers and turn them in to the company.
d. Find out what customers really want and how the company can change its products to
better meet customer needs.
e. Develop long-term relationships with clients.
57. A market is a group of individuals and/or organizations that have needs for products in a given category and
have the ability, willingness, and ____ to purchase such products.
a. utility
b. credit
c. desire
d. money
e. authority
65. Sears buys finished products and sells them for a profit to its customers. Sears is a part of which type of
market?
a. Consumer
b. Producer
c. Governmental
d. Institutional
e. Reseller
3
71. A market segment toward which a company directs its marketing effort is called a
a. marketing group.
b. marketing sample.
c. target market.
d. consumer market.
e. marketing median.
80. Kelly Warren owns a frozen yogurt shop. She has decided to focus her marketing efforts on healthconscious customers. Kelly is using the ____ approach.
a. differentiated
b. undifferentiated
c. concentrated
d. target market
e. marketing-mix
91. Which of the following is not a major marketing mix element?
a. Price
b. Distribution
c. Promotion
d. Packaging
e. Product
102. Influences on the external marketing environment that stem from actions of elected and appointed officials
are called ____ forces.
a. government regulatory
b. legal
c. external cultural
d. social
e. political
112. Levi Strauss is unsure of what sales forecasting method to use in determining future demand for its 501 blue
jeans. When choosing the specific forecasting method, Levi Strauss should consider all of the following
except
a. the costs involved.
b. capital investment projects.
c. time span of the forecast.
d. market characteristics.
e. experience of forecasters.
122. When a company collects external marketing data, it looks at information about
a. its own sales figures.
b. activities of its sales force.
c. its customers.
d. its product and marketing costs.
e. its inventory levels.
133. A fairly recent technology-related tool that many companies use to solicit feedback from customers about
the company’s existing or upcoming products is
a. social media.
b. sales forecasts.
c. consumer buying behavior.
d. market segmenting.
e. customer relationship management.
4
146. Which of the following is not a major category of factors that influence the consumer buying process?
a. Social
b. Psychological
c. Buying center
d. Situational
e. Both social and situational
152. Money used for entertainment comes from ____ income.
a. discretionary
b. gross
c. personal
d. disposable
e. recreational
TRUE/FALSE (10 Questions):
154. The marketing process involves eight major business functions.
163. The four types of utility are time, place, form, and purpose.
174. No product can be marketed successfully by using the undifferentiated approach.
179. Examples of product ingredients of the marketing mix include design of the product and trade names,
packaging, and warranties.
185. Long-range marketing plans typically cover two years.
189. Sales forecasts are used by managers in different divisions of an organization.
190. Accurate and timely information is the foundation of effective marketing, especially of the marketing
concept.
192. A marketing information system manages information from both internal and external sources.
196. Buying behavior may be defined as the decisions and actions of people involved in buying and using
products.
197. Consumers use different types of decision behaviors when buying different products.
198. Consumers are usually better informed than business buyers about the products they buy.
199. A consumer usually will go through all of the steps of the consumer buying decision process for every
purchase.
200. The income an individual receives from all sources less the Social Security taxes that the individual must
pay is called personal income.
201. Marketers are most interested in discretionary income because consumers have the most choice in spending
it.
5
Chapter 13
MULTIPLE CHOICE CASE 1 (1 Case):
Your Way, Inc.
Eric buys companies that are small or companies in financial trouble. He helps these companies turn around
and develop a competitive advantage. The company that he recently purchased is called Your Way, Inc. The
company sells men's clothing and accessories. Your Way keeps the sewing machines for clothes
manufacturing at a separate production facility so that the store location space can be reserved for display
and selling.
After looking over the different products available, Eric realized that the company's previous owner was not
aware of the product life cycle because the company kept items that were obviously too old and out of date.
Also, because of the high turnover, employees did not have good knowledge of the different product lines
and did not know the difference between a product line and a product mix. To move the company forward,
Eric thought of the following two measures: first, developing a new product to incorporate into the product
mix; and second, eliminating the out-of-date products.
20. Refer to Your Way, Inc. What type of products is sold at Your Way?
a. Shopping products
b. Business products
c. Specialty products
d. Convenience products
e. Unique products
21. Refer to Your Way, Inc. The sewing machines are considered ____ for Your Way.
a. raw materials
b. accessory equipment
c. component parts
d. process material
e. major equipment
22. Refer to Your Way, Inc. If Eric wanted to teach his employees about the stages of a product's life cycle, he
should talk about all of the following except
a. expansion.
b. decline.
c. introduction.
d. growth.
e. maturity.
23. Refer to Your Way, Inc. Which of the following descriptions should Eric use to best explain the difference
between the product line and product mix?
a. The product line is a group of similar products that differ only in relatively minor
characteristics, whereas product mix is all the products a firm offers for sale.
b. The product mix is a group of similar products that differ only in relatively minor
characteristics, whereas product line is all the products a firm offers for sale.
c. The product line is a group of unrelated products, whereas product mix is all the products
a firm offers for sale.
d. The product line is a group of similar products, whereas product mix is all products that
are different.
e. There is no difference between a product line and product mix.
6
24. Refer to Your Way, Inc. If Eric wanted to develop a new product, he would begin with
a. concept testing.
b. screening.
c. product analysis.
d. idea generation.
e. marketing analysis.
MULTIPLE CHOICE CASE 2 (1 Case):
Click It, Inc.
Travis is a salesperson for Click It, Inc. Click It does not sell products with its own brand name. Instead, its
products are created for different retail stores and carry the store brand. Travis thought that several changes
needed to be made to a particular product, but Click It management reminded him that the stores, not Click
It, owned the brand.
However, because Click It had been concerned about dropping sales, management listened to Travis's
concerns about the company's pricing. He suggested using a different pricing strategy. More specifically, he
felt that the company should incorporate a multiple-unit pricing strategy because it would then allow Click
It to set a single price for multiple units. This had the potential of increasing sales and therefore profits, so
management agreed to consider Travis's suggestion.
25. Refer to Click It, Inc. Because Click It sells its products under different brand names, each product is a
a. manufacturer brand.
b. private brand.
c. producer brand.
d. generic brand.
e. no name brand.
26. Refer to Click It, Inc. When Travis thinks of products and brands adding value to the company that sells
them, which concept is he referring to?
a. Equilibrium brand
b. Brand extension
c. Generic name
d. Brand demand
e. Brand equity
27. Refer to Click It, Inc. When Click It displays information on a product or its package, this refers to
a. supply.
b. pricing.
c. labeling.
d. brand equity.
e. demand.
28. Refer to Click It, Inc. As Click It management considers the pricing issues, they should know that all of the
following are major pricing objectives except
a. status-quo pricing.
b. market-share goals.
c. survival.
d. profit minimization.
e. target return on investment.
7
29. Refer to Click It, Inc. The multiple-unit pricing strategy suggested by Travis is a ____ strategy.
a. new product
b. psychological
c. equilibrium
d. promotional
e. place
MULTIPLE CHOICE (10 Questions):
30. Everything that one receives in an exchange, including all tangible and intangible attributes and expected
benefits, is called a
a. package.
b. contract.
c. product.
d. trade.
e. warranty.
37. Consumer products can be divided into the following three categories:
a. convenience, shopping, and business.
b. shopping, convenience, and specialty.
c. convenience, component, and accessory.
d. shopping, component, and specialty.
e. business, specialty, and shopping.
46. Iron ore in a steel plant is an example of
a. supplies.
b. component parts.
c. raw materials.
d. process materials.
e. accessory equipment.
54. Sheet steel to be used in making automobile fenders is an example of
a. raw materials.
b. supplies.
c. component parts.
d. accessory equipment.
e. process materials.
61. All of the following are characteristics of the introduction stage of the product life cycle except
a. usually, a low profit or even a loss.
b. the appearance on the market of refinements or extensions of the original product.
c. relatively few competitors.
d. often, high price.
e. low consumer awareness and acceptance of the product.
70. Razor Company's blades are in the maturity stage of the product life cycle. How can the company
strengthen its market share?
a. Eliminate less profitable versions of the product
b. Redesign the packaging
c. Make no style changes
d. Emphasize customer service
e. Watch for the early buying patterns
8
81. The redesign of a bicycle to improve its safety is an example of a(n) ____ modification.
a. visual
b. functional
c. quality
d. aesthetic
e. texture
90. The largest number of product ideas are rejected during the ____ stage of new product development.
a. screening
b. test marketing
c. idea generation
d. business analysis
e. pricing
104. A new product should be left in a test market long enough to
a. stimulate normal quarterly sales.
b. sell every prototype produced.
c. allow buyers a chance to repurchase the item.
d. establish brand loyalty.
e. reveal any major design "bugs."
118. Equate, a brand of health and beauty care products, is available only at Walmart stores. Equate is a ____
brand.
a. producer
b. private
c. distributor
d. generic
e. conglomerate
126. Which of the following is not a major factor contributing to brand equity?
a. Brand loyalty
b. Perceived brand quality
c. Brand-name awareness
d. Brand relationship
e. Brand associations
138. A number of federal regulations specify the information that must be included in labeling. Which of the
following is not specified?
a. Fabric content
b. Safety precautions
c. Ingredient content
d. Packaging content to indicate whether the package is recyclable
e. Fabric cleaning instructions
145. Price serves the function of ____ for goods, services, and financial resources.
a. distributor
b. determining factor
c. screener
d. quantifier
e. allocator
9
171. William Clark wants to know his breakeven point. His selling price is $20 per unit, his fixed costs are
$6,000, and the variable costs per unit are $6. What is his breakeven quantity?
a. 430 units
b. 428.6 units
c. 300 units
d. 425.6 units
e. 50 units
181. When Polaroid comes out with a new model in a series, it sets an initial price and then gradually lowers the
price. Polaroid is initially using which pricing strategy?
a. Penetration pricing
b. Prestige pricing
c. Price lining
d. Premium pricing
e. Price skimming
191. Ties 'R' Us sells a variety of ties at many different prices. Often customers are confused about the pricing
and have a hard time making a buying decision. Ties 'R' Us should use what type of pricing strategy?
a. Odd pricing
b. Price lining
c. Captive pricing
d. Multiple-unit pricing
e. Geographic pricing
200. Discounts offered to encourage early payment of outstanding accounts are called ____ discounts.
a. trade
b. cash
c. wholesale
d. quantity
e. preferential
TRUE/FALSE (10 Questions):
198. A product may be a good or a service but not an idea.
208. There are two dimensions to a firm's product mix: volume and breadth.
215. A brand mark is the part of a brand that consists of a symbol or distinctive design.
222. The three levels of brand loyalty are preference, recognition, and insistence.
227. Packages have marketing value but no functional value.
233. The same price will be charged no matter what pricing objective is used.
239. Markup pricing is easy to apply, although it is difficult to determine an effective markup percentage.
245. Competition-based pricing is important if competing products are similar and the organization is serving
markets in which price is the crucial variable of the marketing strategy.
249. The strategy of developing a large market share for a new product by setting a very low price is called
penetration pricing.
10
252. An early-bird special offered by a restaurant during off-peak hours is an example of a secondary-market
pricing strategy.
253. Random discounting is often predictable so consumers wait to make purchases until they can benefit from
the price reductions.
256. A price of $5.95 for a product would fall into the category of odd-number pricing.
259. A company wanting to maximize profits from its new product would use product-line pricing.
260. Three types of product-line pricing are price leaders, special-event pricing, and comparison discounting.
264. Pricing whereby the buyer absorbs all or part of the freight costs is freight absorption pricing.
266. Seasonal discounts provide price incentives to customers during peak selling seasons.
11
Chapter 14
MULTIPLE CHOICE CASE 1 (1 Case):
XYZ & ABC
XYZ Furniture is a manufacturer of contemporary furniture that sells its products through retail stores
throughout the country. XYZ management wants to explore different channels of distribution and feels that
the company should use all available outlets to sell its products. ABC Distributors have brought a proposal
to the company to be its wholesaler. As a wholesaler, ABC represents many different companies and sells
various products to many different retailers. ABC hopes that, with such a wide variety, the company will be
able to keep profits high if one product or manufacturer should fail.
13. Refer to XYZ & ABC. XYZ uses middlemen that take title to products, thus they would be referred to as
a. merchant middlemen.
b. transport middlemen.
c. selective middlemen.
d. functional middlemen.
e. direct middlemen.
14. Refer to XYZ & ABC. Which of the following is not an option for channels of distribution for XYZ?
a. Producerwholesalerretailerconsumer
b. Produceragentwholesalerretailerconsumer
c. Producerconsumer
d. Producerretailerconsumer
e. Producerwholesalerconsumeragent
15. Refer to XYZ & ABC. When the XYZ management feels that it should use all available outlets for its
furniture, what type of distribution is the company interested in using?
a. Exclusive distribution
b. Intensive distribution
c. Internal distribution
d. Selective distribution
e. Inclusive distribution
16. Refer to XYZ & ABC. As a wholesaler, ABC would provide all of the following services for XYZ
Furniture except
a. providing an instant sales force.
b. reducing inventory cost.
c. providing manufacturing labor.
d. assuming credit risk.
e. furnishing market information.
17. Refer to XYZ & ABC. ABC Distributor can be described as what type of wholesaler?
a. Full-service wholesaler
b. Limited-service wholesaler
c. Specialty-line wholesaler
d. Limited-line wholesaler
e. General-merchandise wholesaler
12
MULTIPLE CHOICE CASE 2 (1 Case):
D-Tree for Less
Joey and Allison (husband and wife) decided that they wanted to open their own retail stores. This was
something that Allison had wanted to do since her father lost his business when she was young. Joey
believed that Allison would be great at running a business, so he planned to start his own business to bring
in additional money.
Allison first thought of opening a retail-store franchise, but felt it would be too restrictive. She finally
decided to open something similar to her father's original smaller store, but to do it in a big way. She called
it D-Tree for Less, and her slogan was "Dupree Back in Action." Her father's name was Dupree. The store
would sell home furnishings, appliances, clothing for all, and other items in different parts of the store.
Given the size of the store, Allison felt that she would need at least 30 employees just to run everything
smoothly.
Once Allison's store was up and running, Joey started his own large specialty store selling only fishing
equipment. Joey kept his prices significantly lower than the competition, since he was going after volume
business. Joey opened his store in a major shopping center in the hopes that it would bring in more foot
traffic.
Allison's store got so big over time that she had to build a separate warehouse to hold additional inventory
and large appliances. Allison realized that this would require many new hires and a lot of training. She did
not have time for it, so she delegated this responsibility to a manager. Allison knew that her business was
going to thrive; she just wished her father were around to see it.
18. Refer to D-Tree for Less. Allison's business can be described as which of the following?
a. Chain retailer
b. Generic retailer
c. Convenience retailer
d. Promotion retailer
e. Independent retailer
19. Refer to D-Tree for Less. D-Tree for Less can be described as which of the following?
a. Discount store
b. Convenience store
c. Department store
d. Warehouse store
e. Chain store
20. Refer to D-Tree for Less. What would Joey's store be considered?
a. Convenience store
b. Category killer
c. Department store
d. Catalog store
e. Franchise
21. Refer to D-Tree for Less. Joey's store was probably located in which type of shopping center?
a. Neighborhood
b. Community
c. Regional
d. Warehouse showroom
e. Wholesale shopping center
13
22. Refer to D-Tree for Less. As Allison's business builds and utilizes warehousing, she will complete all of the
following activities except
a. displaying items for sale.
b. dispatching goods.
c. holding goods.
d. identifying goods.
e. dispatching shipments.
MULTIPLE CHOICE (10 Questions):
25. A general term for a middleman that actually takes title to products by buying them is a
a. functional middleman.
b. broker.
c. retailer.
d. sales agent.
e. merchant middleman.
34. Mullin, Inc., purchases supplies such as paper towels, soap, toilet paper, and seat covers directly from
manufacturers and then sells them to other firms. Mullin, Inc., is a(n)
a. retailer.
b. wholesaler.
c. functional middleman.
d. agent.
e. producer.
41. Nine West manufactures leather goods such as shoes and handbags. Which form of distribution is this
company most likely to use?
a. Exclusive
b. Intensive
c. Comprehensive
d. Agent-driven
e. Selective
51. PepsiCo buys a can manufacturing company. This is an example of
a. intensive distribution.
b. vertical channel integration.
c. exclusive integration.
d. intensity of market coverage.
e. contractual distribution.
61. Consumers who strongly feel that the distribution channel should be made as short as possible also assume
that the fewer the intermediaries, the
a. less convenient the system.
b. lower the price.
c. higher the price.
d. more marginal the product.
e. more traditional the system.
68. Merchant wholesalers usually do not
a. operate one or more warehouses.
b. take title to goods.
c. store goods in warehouses.
d. purchase in large quantities.
e. sell to consumers.
14
79. Sandy is a specialist in crude oil. She represents buyers or sellers and is generally hired on a temporary
basis. She is known for her expertise in crude oil. Sandy is a(n)
a. agent.
b. limited-line wholesaler.
c. broker.
d. commission merchant.
e. full-service wholesaler.
87. Self-service, general-merchandise outlets that sell goods at lower than usual prices are called ____ stores.
a. discount
b. department
c. convenience
d. specialty
e. shopping
100. ____ carry huge inventories of groceries and many commonly purchased nonfood items.
a. Supermarkets
b. Superstores
c. Discount stores
d. Department stores
e. Specialty stores
113. Which of the following accounts for an increasing percentage of total retail sales in the U.S. marketplace?
a. Middlemen
b. Nonstore retailing
c. Wholesaling
d. VMS
e. Independent retailing
120. Regulations associated with the national do-not-call registry are enforced by the
a. National Advertising Federation.
b. Federal Trade Commission.
c. Federal Bureau of Investigation.
d. Telemarketing Association of America.
e. American Marketing Association.
127. A ____ is a self-contained retail facility designed to serve diverse groups of customers.
a. planned shopping center
b. convenience store
c. warehouse club
d. superstore
e. mail-order retailer
136. ____ involves managing inventories in such a way as to minimize inventory costs, including both holding
costs and potential stock-out costs.
a. Physical distribution
b. Materials handling
c. Order processing
d. Warehousing
e. Inventory management
15
145. Along with storage, warehousing activities usually include all of the following except
a. receiving goods.
b. identifying goods.
c. sorting goods.
d. market testing goods.
e. both identifying and sorting goods.
156. The mode of transportation that is recognized as the fastest is
a. trucks.
b. airplanes.
c. pipelines.
d. railroads.
e. ships.
160. A highly specialized mode of transportation that is used primarily to carry petroleum and natural gas is
a. pipelines.
b. trucks.
c. railroads.
d. airplanes.
e. ships.
TRUE/FALSE (10 Questions):
165. The most direct channel for consumer products is from producer to retailer to consumer.
169. When a producer wants to give its product the widest possible exposure in the marketplace, it chooses
intensive distribution.
173. Exclusive distribution is usually limited to very prestigious products like jewelry or fine china.
177. Vertical channel integration occurs when a manufacturer controls its entire supplier channel.
181. Eliminating wholesalers would bring prices down.
185. An intermediary that purchases goods in large quantities, takes title to the merchandise, and then sells it to
retailers or business users is called a commission broker.
189. Commission merchants carry merchandise and negotiate sales for retailers.
193. According to the U.S. Bureau of the Census, a department store is a retail store that employs fifteen or more
employees.
197. Almost 70 percent of convenience store customers live within one mile of the store.
201. Direct marketing is the marketing of products to customers through face-to-face sales presentations at home
or in the workplace.
204. A neighborhood shopping center usually has at least one large department store to attract customers to the
center.
208. Public warehouses will hold and issue receipts for goods used as collateral for borrowed funds.
212. Most of the commodities carried by railroads could just as easily be transported by some other mode.
216. The slowest but least expensive means of transportation is by ship and barges.
218. Airlines carry only about 20 percent of all intercity freight.
16
Chapter 15
MULTIPLE CHOICE CASE 1 (1 Case):
SME Ads Inc. (SME)
Steven Monahan owns SME Ads Inc., an advertising agency. At present, the company focuses on
advertising only. However, Steven plans to expand the company's focus to include all the major elements of
an organization's promotional mix. Steven feels that expanding the focus in such a way will allow the firm
to meet customer needs in a more coordinated fashion. Currently, the firm organizes its work according to
the media being used. Steven believes this is the most effective way to subdivide advertising. Since
television is the most widely used advertising medium, the company spends most of its time on television
advertising. SME knows what it takes to get the job done, and it is committed to success.
20. Refer to SME Ads Inc. As Steven plans to expand the company's focus to other major elements of the
promotion mix, which of the following should he focus on if he wants to help his clients create and
maintain favorable relationships between them and their various internal and external groups?
a. Word-of-mouth
b. Sales promotion
c. Rebates
d. Public relations
e. Personal selling
21. Refer to SME Ads Inc. Which of the following terms refers to the type of advertising SME would use to
increase the demand for all brands of a product within a specific industry?
a. Brand advertising
b. Selective-demand advertising
c. Corporate advertising
d. Primary-demand advertising
e. Institutional advertising
22. Refer to SME Ads Inc. SME recently created advertising for Maruti Automobiles for its new line of cars
called Maruti Marvels. Such brand-oriented advertising is called
a. primary-demand advertising.
b. selective-demand advertising.
c. institutional advertising.
d. individualized advertising.
e. private advertising.
23. Refer to SME Ads Inc. Given that television ranks number one in total advertising revenue, if a client is
interested in reaching a national audience, SME should advise the client to buy which of the following?
a. Network time
b. Yellow page sponsorship
c. Order getter
d. Local time
e. Personal selling
24. Refer to SME Ads Inc. In developing the advertising campaign for a client, in which of the following steps
should SME include the important selling points or features of the client's products?
a. Identifying and analyzing the industry
b. Defining the advertising objectives
c. Creating the advertising platform
d. Determining the advertising appropriation
e. Developing the media plan
17
MULTIPLE CHOICE CASE 2 (1 Case):
R&P Inc.
R&P Inc. is an emerging company that wants to focus on personal selling, sales promotion, and public
relations activities. R&P's management understands that personal selling is about the personal
communication aimed at customers, but they feel that determining more specifics about the products they
sell will allow them to better achieve their goal. Another important route they would like to take is to learn
more about the various types of sales promotion. Finally, management would like to focus more on
publicity-based PR. By concentrating on these areas, the company believes that it will be able to
successfully create a promotional campaign.
25. Refer to R&P Inc. During which step of the personal selling process should an R&P salesperson ask the
prospect to buy the product?
a. Closing the sale
b. Prospecting
c. Answering objections
d. Approaching the prospect
e. Making the advertisement
26. Refer to R&P Inc. R&P management could use sales promotions for any of the following objectives except
a. to attract new customers.
b. to boost sales to current customers.
c. to reinforce advertising.
d. to steady increasing sales patterns.
e. to improve shelf space and displays.
27. Refer to R&P Inc. If R& P management chose to return a portion of a product's purchase price as a sales
promotion method, it would be referred to as which of the following?
a. Sample
b. Rebate
c. Premium
d. Coupon
e. Direct mail
28. Refer to R&P Inc. If the managers at R&P were interested in implementing the most widely used type of
publicity, they should utilize which of the following?
a. News release
b. Captioned photograph
c. Point-of-purchase display
d. Feature article
e. Press conference
29. Refer to R&P Inc. R&P management knows that ____ is the most effective and least expensive means of
communicating product information to a large number of individuals and organizations.
a. advertising
b. personal selling
c. sales promotion
d. public relations
e. corporate promotion
18
MULTIPLE CHOICE (10 Questions):
30. Ted Paine wants to facilitate exchange for his products by informing groups and influencing them to accept
his firm's products. What would you suggest?
a. Select the appropriate channel of distribution.
b. Select the appropriate promotional activities.
c. Select the best manufacturer for his products.
d. Don't worry; intelligent people will find good products.
e. Avoid expensive advertising.
36. In its broader role, promotion serves to expedite exchanges directly and to bring about exchanges indirectly.
In other words, promotion serves to
a. maintain positive relationships between a company and groups in the marketing
environment.
b. create positive relationships between producers and consumers.
c. foster harmonious relationships among marketers.
d. control consumer needs.
e. encourage industry to push undesirable items.
42. Lisa is in charge of maintaining good relationships between her organization and local government,
business leader groups, and the general public. Lisa's responsibilities can be called
a. advertising.
b. personal selling.
c. press coordination.
d. sales promotion.
e. public relations.
48. Advertising that concentrates on the specific attributes of the productits brand, style, and typeis an
example of
a. primary-demand advertising.
b. direct-mail advertising.
c. institutional advertising.
d. selective-demand advertising.
e. publicity.
54. The Rustic Market, a small antique shop, periodically runs advertisements in the local newspaper to keep its
name before the public. This is known as ____ advertising.
a. primary-demand
b. immediate-response
c. reminder
d. comparative
e. public relations
62. When major oil companies advertise to build goodwill rather than to stimulate sales, they are using
a. institutional advertising.
b. primary-demand advertising.
c. public relations.
d. publicity.
e. selective-demand advertising.
70. Which of the following is true about magazine advertising?
a. Spending on magazine advertising has been flat over the last few years.
b. With the rise in Internet advertising, spending on magazine advertising has been drastically reduced.
c. Over the last five years, magazine advertising has seen small incremental growth.
d. Due to the short life span of magazine advertising, magazine advertising has minimally decreased.
e. Spending on magazine advertising has been on a slow rise over the past decade.
19
78. Billboards, signs, and skywriting are examples of ____ advertising.
a. out-of-home
b. reminder
c. cooperative
d. selective
e. institutional
90. A rotisserie cooker is demonstrated on television. The program lasts 30 minutes and tells consumers why
they need a rotisserie cooker and the health and convenience benefits it provides. This is a(n)
a. commercial.
b. spot time.
c. sitcom.
d. informational session.
e. infomercial.
103. Driscoe, Inc., is in the process of developing an advertising campaign for its new product. It has identified
the group to whom it will direct advertisements and has drafted the advertising objectives. Which of the
following is not an advertising objective and thus should be deleted from the list?
a. Increase product awareness.
b. Hire a marketing manager within one year.
c. Convey product information.
d. Increase sales by 10 percent.
e. Expand the market share by 5 percent.
118. The most expensive but most adaptable method of the promotion mix is
a. sales promotion.
b. advertising.
c. direct mail.
d. personal selling.
e. publicity.
125. Vicky works as a salesperson for Lands' End. Her duties consist of taking customer orders over the
telephone and ensuring that the information is properly entered so that customers will receive the products
they need. Vicky is a(n)
a. order getter.
b. missionary salesperson.
c. prospector.
d. outside order taker.
e. inside order taker.
137. When has Natalie, an industrial supplies salesperson, completed her job with a particular client?
a. When she overcomes the objections of the client
b. When she closes a sale with the client
c. Never, as long as she maintains a working relationship with the client
d. When she follows up with the client to ensure that a correct and timely delivery was made
e. When she thanks the client for the business and asks for other prospects
142. When a retail store such as Sears offers a one-day promotion for an extra 15 percent off to customers
holding a charge account with them, it is attempting to
a. draw new customers.
b. invigorate the sales of a mature brand.
c. steady irregular sales patterns.
d. boost sales to current customers.
e. neutralize competitive promotional efforts.
20
152. Jersey Mike's Sub Shop offers its customers a card to stamp each time they buy a sandwich. When the card
is full, the customer can redeem it for a free sandwich. This sales promotion is a
a. buying allowance.
b. frequent-user incentive.
c. coupon.
d. premium.
e. loyalty reward.
162. Suppose the company you work for wants to use publicity to raise public awareness of the company's
products. Which of the following would be among the issues addressed in its publicity releases?
a. Changes in credit terms
b. Visits by famous persons
c. Athletic events
d. Employment gains
e. New uses for old products
180. For Minute Maid's new line of juice drinks to be successful, the company developed a promotion mix to
reach a wide audience. The most effective promotion mix for reaching a wide audience would include ____
and ____.
a. advertising; publicity
b. advertising; sales promotion
c. sales promotion; personal selling
d. sales promotion; publicity
e. personal selling; advertising
21
TRUE/FALSE (10 Questions):
184. Communication that is intended to inform, persuade, or remind an organization's target markets about the
organization and its products is called promotion.
188. Marketers tend to design promotional communication for wider audiences rather than for a specific group.
192. Advertising and personal selling make up the entire field of marketing.
196. Selective-demand advertising is advertising designed to enhance a firm's image or reputation.
200. Newspapers, magazines, television, radio, direct mail, and out-of-home displays are all examples of
advertising media.
204. Direct-mail advertising is the most selective medium for reaching a specific audience.
208. Network time can be effectively used by independent local firms.
212. A banner ad is a rectangular graphic that appears at the top of a magazine cover.
216. Advertising appropriation should be based on the historical average of the company's advertising
expenditure.
220. The most adaptable of all promotion methods is personal selling because the message can be modified to
suit the individual buyer.
224. The first step in personal selling is to reach potential buyers and to choose the most likely prospects.
230. The Detroit Auto Show, one of the largest of its kind, allows the world's car makers to promote their newmodel cars and trucks. The Detroit Auto Show is an example of a trade show.
236. To announce the acquisition of Snapple Beverage Corp. by the Quaker Oats Company, Quaker executives
invited several news organizations to its headquarters to get details on, and ask questions about, the
purchase. This is an example of a press conference.
238. A firm with a limited budget for promotion will probably rely on advertising because personal selling is so
expensive.
239. The income level of the target market influences the choice of promotion techniques the most.
241. Companies that need to contact millions of potential customers will emphasize sales promotion and
advertising because of the relatively low cost per person reached.
243. Promotion has been blamed on increased consumer prices.
22
Chapter 16
MULTIPLE CHOICE CASE 1 (1 Case):
Pure Training, Inc.
Pure Training, Inc., is a company that helps people start their own businesses. As part of the training it
provides, the company covers many different aspects of entrepreneurship for Internet-based companies.
One principle its trainers focus on is customer service. Pure Training emphasizes the importance of
connecting with potential and current customers as well as improving customer service. Developing a social
media presence is another focus of Pure Training in its entrepreneur-based sessions. The trainers provide
their clients with sufficient market research and statistics to understand trends in various areas that involve
the Internet and social media. Pure Training prides itself on helping entrepreneurs launch and maintain
successful businesses through a major Internet presence.
22. Refer to Pure Training, Inc. When Pure Training is discussing typical measurements for various types of
social media and it starts discussing “number of fans,” “number of likes,” and “growth of wall responses,”
clients should know that these are typical measurements for
a. Facebook.
b. YouTube.
c. Twitter.
d. Pinterest.
e. MySpace.
23. Refer to Pure Training, Inc. If clients (the business owners) were asking for workshops to allow their
customers to listen to audio files about their product or service, Pure Training would be organizing ____
workshops.
a. blog
b. podcast
c. social content site
d. social game
e. forum
24. Refer to Pure Training, Inc. Pure Training was founded 10 years ago and it’s now ready to venture into
offering workshops for businesses selling to other businesses primarily through the Internet. Which of the
following is most likely to be a new addition to their agenda?
a. Blogs
b. Video creation
c. Podcast
d. Photo uploads
e. Webinars
25. Refer to Pure Training, Inc. When Pure Training discusses KPIs in its measurement workshop, clients
should know that KPIs are ____ and measure achievement of the organization’s ____.
a. qualitative; objectives
b. quantitative; sales
c. quantitative; social media success
d. quantitative; objectives
e. qualitative; customer service
23
MULTIPLE CHOICE CASE 2 (1 Case):
Academic Standard, Inc. (ASI)
Academic Standard, Inc. (ASI), sells its products through the Internet. Amanda is one of the biggest buyers
of the company’s products for her business. Nearly all of the interactions between Amanda’s company and
ASI have been electronic, saving both time and energy.
Although transaction costs are reasonable, ASI has encountered financial problems with high production
costs. Jonathan, a veteran employee of ASI, suggested to senior management that certain aspects of
production may need to be handled by other, more efficient companies. Jonathan also suggested that the
company might want to create a physical store to possibly increase its visibility and potential profits. He
explained many disadvantages of operating solely through the Internet.
26. Refer to Academic Standard, Inc. Academic Standard can be classified as a(n)
a. service business.
b. e-business.
c. social media business.
d. social content business.
e. media sharing business.
27. Refer to Academic Standard, Inc. Amanda’s interaction with ASI is an a example of
a. B2B.
b. B2C
c. business to supplier
d. business to customer
e. business to client
28. Refer to Academic Standard, Inc. Jonathan suggested that the company ____ part of production.
a. import
b. export
c. outsource
d. supply-chain
e. barter
29. Refer to Academic Standard, Inc. Which of the following would not have been a disadvantage for ASI?
a. Users must have Internet access.
b. The Internet requires specialized knowledge to use.
c. The Internet is a less desirable means of communication compared to direct
communication.
d. Promotional efforts may be annoying.
e. The Internet is an expensive method of promoting the firm.
30. Refer to Academic Standard, Inc. All except ____ forces are primary external environmental forces that
ASI needs to be mindful of in regard to the company’s use of technology.
a. globalization
b. customer service
c. societal
d. economic
e. legal and political
24
MULTIPLE CHOICE (10 Questions):
31. Social media can most accurately be described as being about
a. technology.
b. people.
c. the Web.
d. new development.
e. communication.
35. When were Facebook and Twitter were created?
a. In the past two years
b. In the late 1970s
c. In the late 1980s
d. In the past decade
e. In the early 1990s
39. Which of the following is most likely to be the manner in which a business connects and communicates with
other businesses rather than with customers?
a. Photo sharing
b. Blogs
c. Video sharing
d. Webinars
e. Podcasts
45. Which of the following is most like a radio show that could be distributed through the Web?
a. Podcast
b. Blog
c. Wiki
d. Forum
e. Social game
46. What is Groupon?
a. Social gaming site
b. A forum
c. A wiki
d. Blogging site
e. Social media site
47. In a consumer poll, more than ____ percent of consumers said that they trust online computer opinions.
a. 40
b. 50
c. 60
d. 70
e. 80
48. Which of the following companies was one of the early adopters of consumer ratings?
a. Facebook
b. Yelp
c. MySpace
d. Amazon
e. SocialLiving
25
54. According to a survey by eMarketer, ____ of U.S. companies with more than 100 employees are using
social media tools for marketing.
a. 60
b. 70
c. 75
d. 80
e. 90
55. Which of the following can be most closely associated with “outsourcing tasks”?
a. Blogs
b. Podcasts
c. Social gaming
d. Crowdsourcing
e. Media sharing
56. Mystarbucksidea.com.com is an example of a ____ site.
a. social networking
b. crowdsourcing
c. gaming
d. blogging
e. podcast
62. Which of the following is the first step in building a social media plan?
a. Listen to determine opportunities
b. Integrate the plan
c. Segment and target the social media customer
d. Select social media tools
e. Establish social media objectives
66. Which of the following are not considered a social media tool?
a. Blogs
b. Videos
c. Photos
d. Podcasts
e. DVDs
67. Which of the following is true about social media measurement tools?
a. Most companies use quantitative measurements.
b. Companies should use the same measurements for online as for offline.
c. There are generally five types of social media measurement.
d. Social media cannot be measured quantitatively.
e. Most companies use qualitative measurements.
68. Quantitative measurements like unique visitors, number of views, and ratio of visitors to posted comments
are typical measurements for
a. blogs.
b. forums.
c. Twitter.
d. Facebook.
e. YouTube.
26
69. Number of fans and number of likes are typical measurements for
a. YouTube.
b. Facebook.
c. Twitter.
d. Pinterest.
e. LinkedIn.
73. Computers and software belong to which of the following specialized e-business resources?
a. Human
b. Financial
c. Material
d. Informational
e. Digital
77. When Dell Computer allows workers in a foreign country to provide technical assistance to its customers, it
is engaging in
a. external recruitment.
b. revenue stream buildup.
c. insourcing.
d. outsourcing.
e. employment sourcing.
80. A ____ is a source of revenue flowing into the firm.
a. profit flow
b. cash stream
c. cash output
d. buyer source
e. revenue stream
82. Which of the following would be considered a revenue stream?
a. Advertising
b. Subscription fees
c. Sales of products
d. Sales of services
e. All of the above
87. The Wall Street Journal’s online edition is not provided free to Internet users. Therefore, the primary
revenue stream for this online version is probably
a. sales of business products.
b. sales of business services.
c. investment advice.
d. subscription fees.
e. referral services.
88. Marta invests a substantial amount of money to take her business online. She is extremely discouraged
when three months pass and she has not produced enough new revenues to offset the high start-up costs.
What sound advice could you give Marta?
a. Hurry up and cut your losses now and get out before you lose everything.
b. If in two more months things have not turned around, take the business offline.
c. It is unusual for an e-business to take such a long time to recover its investment, so she
must be doing a poor job.
d. Because the initial start-up costs were high, it may take longer to recover, but it is too soon
to determine the long-term success.
e. To make the business successful, she should double the amount of money invested in the
e-business.
27
92. McDonald’s and Burger King share a similar ____ because they offer about the same products and need
about the same type of employees.
a. business-to-business model
b. marketing campaign
c. business model
d. hierarchy of service
e. background
93. Bit Torrent is an example of ____ model.
a. subscription
b. B2C
c. B2B
d. m-commerce
e. consumer-to-consumer
103. Online firms like Amazon.com that take a B2C model approach
a. emphasize a consumer focus.
b. try to build long-term relationships with their customers.
c. try to understand how customers behave online.
d. are focused on individual buyers.
e. incorporate all of the above.
106. Which of the following specialized business models would perform e-business activities to generate
revenues by matching online buyers and sellers to facilitate exchanges?
a. Advertising e-business model
b. Brokerage e-business model
c. Subscription e-business model
d. Pay-per-transaction e-business model
e. C2B e-business model
112. External forces that affect e-business include all of the following except
a. globalization.
b. available financing.
c. changing technology.
d. economic factors.
e. all of the above are external forces that affect e-business.
114.
___ is a general, broad term used for software designed to infiltrate a computer system without the user’s
consent.
a. Log-file recording
b. Cookie
c. Data mining
d. Malware
e. Virus
115. If Jumble Bee Toys starts a type of computer usage in which services stored on the Internet are provided to
users on a temporary basis, the company is using
a. B2C.
b. B2B.
c. data mining.
d. cloud computing.
e. e-business.
28
116. ____ refers to a firm’s activities to support a healthy environment and sustain the planet.
a. Green environment
b. Green IT
c. Eco IT
d. Green MIS
e. Enviro IT
TRUE/FALSE (10 Questions):
118. “Digital natives” have typically grown up with technology and are comfortable sharing information about
themselves.
121. Facebook has one of the largest social networks and one of the “stickiest” Web sites.
122. Social media offers extensive, nearly full control over what is said about a company and/or their products or
services.
125. Engaging customers in product development is a recognized use of social media.
129. Flickr would be considered a social gaming site.
132. LinkedIn is considered one of the top four social networking sites used by business.
135. A wiki is an online collaborative working space.
136. Millenials are tech-savvy digital natives born after 1990.
139. Objectives in a social media plan need to be specific as well as linked to clear actions that can be used to
accomplish each objective.
143. All social media plans have a defined, clear start and stop date.
146. Number of followers and number of retweets are typical social media measurements of Facebook.
152. There are no such things as special e-business resources.
155. The growth of the Internet has created some new customer needs that did not exist before the creation of the
Internet.
159. Generally, it is desirable if e-business activities can shift revenues from traditional retail stores to online
sales.
163. Standard & Poor’s Web site is an example of a brokerage e-business model.
168. Firms that tend to focus on conducting e-business with other businesses are referred to as having a B2B
focus.
169. Online booksellers that seem to be following the same business activities are said to be using a B2B
business model.
170. Because Amazon.com focuses on conducting e-business with consumers, it is considered to have a B2C
focus.
29
174. Data mining is the practice of saving all data to the cloud to be accessed through the Internet.
176. Data mining refers to searching large amounts of data looking for useful information.
30
Chapter 17
MULTIPLE CHOICE CASE 1 (1 Case):
Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in
most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules,
just like any other accounting firm. If there are information gaps that are not addressed and resolved by the
firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done
and wants every employee of the firm to understand that they have to follow all the rules and regulations.
Like any other industry, accounting is a competitive industry and employees of accounting firms must be
productive, progressive, and well trained.
19. Refer to Ridgley, Cooper, and Ross. Which of the following represents a key component of the SarbanesOxley Act relating to consulting services?
a. A public corporation must change its lead consulting firm every five years.
b. Accounting firms are prohibited from providing many types of consulting services to the
companies they audit.
c. Accounting firms who report violations of the Sarbanes-Oxley Act must be banned from
consulting for five years.
d. The SEC is required to establish a full-time five-member federal oversight board that will
police the consulting industry.
e. Consultants must maintain financial documents and audit work papers for fifteen years.
20. Refer to Ridgley, Cooper, and Ross. What does GAAP stand for?
a. Generally accepted accounting principles
b. Generally accepted auditing principles
c. Generalized accounting and auditing principles
d. Generic accounting alternative practices
e. General administrative accounting practices
21. Refer to Ridgley, Cooper, and Ross. One of RCR's clients is ABC Electronics. RCR develops ABC
Electronics' statements and reports for ABC's stockholders, financial analysts, and bankers. These services
can be classified as which of the following?
a. Non-accounting services
b. Tax accounting
c. Financial accounting
d. Managerial accounting
e. Cost accounting
22. Refer to Ridgley, Cooper, and Ross. In order to be successful in the accounting industry, RCR employees
must
a. know all areas of accounting and marketing.
b. have complete human resources training.
c. be able to communicate in multiple languages.
d. know how to do accounting the old fashioned wayusing the manual, double- entry system.
e. have a strong background in financial management.
23. Refer to Ridgley, Cooper, and Ross. If you applied for a job at RCR and were asked to state the accounting
equation, which of these would you state?
a. Assets = liabilities  owners' equity
b. Assets + liabilities = owners' equity
c. Assets  liabilities = owners' equity
d. Assets = liabilities + owners' equity
e. Assets = liabilities  owners' equity
31
MULTIPLE CHOICE CASE 2 (1 Case):
Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA
exam. She recently interviewed with a relatively small and new company and was offered a job. The offer
sounded very promising; the job had opportunities to grow with the company and provided diverse
challenges. Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general
understanding of accounting. She had to teach them the steps in an accounting cycle so they would be able
to understand how she was going to create reports. When she talked about the statement of financial
position, they had no idea what she was talking about. She was the qualified individual responsible for
accounting. No one else working with her had much knowledge. They did not even know the different
financial ratios that someone could use to understand the financial standing of a company. Christine knows
it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
24. Refer to Christine's First Job. When Christine explained the steps in the accounting cycle, she identified
which of the following as the first step in the accounting cycle?
a. Analyzing the source documents
b. Preparing financial statements
c. Posting
d. Preparing the trial balance
e. Recording
25. Refer to Christine's First Job. If the owners did not recognize the term "statement of financial position,"
Christine could use which of the following more common terms?
a. income statement
b. balance sheet
c. statement of cash flow
d. statement of retained earnings
e. statement of financial ratios
26. Refer to Christine's First Job. When Christine explained the asset side of the statement, she included which
of the following?
a. Retained earnings
b. Notes payable
c. Merchandise inventory
d. Long-term liabilities
e. Stockholders' equity
27. Refer to Christine's First Job. To help the owners understand how effectively the firm is transforming sales
into profits, Christine should address which of the following ratios?
a. Return on sales
b. Earnings per share
c. Acid-test ratio
d. Return of owners' equity
e. Inventory turnover
28. Refer to Christine's First Job. If the owners were interested in obtaining their working capital figures,
Christine should do which of the following?
a. Divide current assets by current liabilities
b. Multiply current assets by current liabilities
c. Divide net income after taxes by net sales
d. Get the difference between current assets and current liabilities
e. Subtract inventory from current assets
32
MULTIPLE CHOICE (10 Questions):
31. An audit is
a. performed by the firm's private bookkeepers.
b. not necessary if the firm used generally accepted bookkeeping procedures.
c. required by many bankers and lenders who are trying to validate a firm's accounting
statements.
d. a waste of the firm's resources.
e. a guarantee that a firm hasn't "cooked" the books.
40. The president of Universal Foods Corporation is seeking your advice on the kinds of information provided
by an accounting system that would be helpful to her. Since the president is developing a new, companywide strategy, she would be most interested in the
a. performance appraisals of employees in one of the three customer service centers.
b. total sales for all of the company's products.
c. sales for one of the company's products.
d. payroll figures for employees at one of the ten warehouse facilities.
e. lists of primary and secondary suppliers for one of the five production plants.
49. Jane Cook started a small manufacturing firm two years ago. Now, after two years, she decides it is time to
hire an accountant to work in the office and process all her financial data. This accountant will be a
a. certified auditor.
b. certified bookkeeper.
c. managerial bookkeeping clerk.
d. private accountant.
e. public accountant.
58. Debts owed by a business are called
a. assets.
b. expenses.
c. liabilities.
d. equities.
e. revenues.
67. Richard Samonski does not understand the significance of the accounting equation. You explain its
importance in the simplest way by saying that
a. as a result of each transaction, the total assets should equal the total liabilities plus owners' equity.
b. as a result of most of the transactions, assets and liabilities are equal.
c. owners' equity is not as important as assets and liabilities.
d. it is just an exercise in accounting.
e. as a result of each transaction, total liabilities should equal total assets plus owners' equity.
76. Sarah has just completed journalizing the day's entries in the general journal for her housecleaning business.
The next step she must take in the accounting cycle is
a. posting the journal entries to the ledger.
b. analyzing the day's transactions.
c. making adjustments in the journal.
d. preparing a trial balance.
e. closing the books and preparing financial statements.
85. The ease with which an asset can be converted into cash is referred to as its
a. liquidity.
b. profitability.
c. solvency.
d. convertibility.
e. capitalization capacity.
33
94. Television sets that Best Buy owns for selling to its customers are classified as
a. equipment.
b. machinery.
c. receivables.
d. merchandise inventory.
e. prepaid merchandise.
103. When Josh sold his Internet auction site to eBay, he received $2,000,000 more than the total value of his
assets as listed on his balance sheet. How will eBay classify this $2,000,000?
a. Goodwill
b. Reputation
c. Equipment
d. Research and development
e. Retained earnings
112. Rick and Joe get together and start a mortgage brokerage business. They each contribute $25,000 of capital
to the business. After the first year of operation, the total owners' equity is listed as $60,000. Most likely,
the additional $10,000 of owners' equity is
a. common stock.
b. long-term liabilities.
c. current liabilities.
d. retained earnings.
e. a bank loan.
121. Marilyn provides piano lessons to students in her home four days a week. The money she earns from
providing these services would be called ____ on an income statement.
a. expenses
b. cash
c. revenues
d. retained earnings
e. equity
130. During the year Comer, Inc., had $200,000 in goods available for sale. At the end of the accounting period
it had an ending inventory of $40,000. This reveals that it had sold all but ____ worth of the available
goods.
a. $200,000
b. $160,000
c. $40,000
d. $20,000
e. $10,000
139. Schluster Hardware, Inc., had a gross profit of $380,000, operating expenses of $210,000, and income taxes
of $48,000. What is Schluster's net income after taxes?
a. $122,000
b. $80,000
c. $208,000
d. $170,000
e. $332,000
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148. Intel decides to issue new stock in order to build a new facility and expand its operations. The receipt of
cash from this stock issue would appear in the ____ section of the statement of cash flows.
a. operating
b. business
c. equity
d. investing
e. financing
157. Rich wants to measure the profitability of his business. Which of the following pairs of ratios would you
recommend for this?
a. Return on owners' equity and debt-to-equity
b. Current ratio and acid-test ratio
c. Return on sales and sales turnover
d. Inventory turnover and earnings per share
e. Earnings per share and return on sales
166. The ratio that is sometimes referred to as the quick ratio is the
a. inventory turnover.
b. acid-test ratio.
c. current ratio.
d. debt-to-assets ratio.
e. debt-to-equity ratio.
177. Mallard Decoy Manufacturing has total liabilities of $40,000 and total assets of $120,000. The owners'
equity for the firm is $100,000. What is the firm's debt-to-owners' equity ratio?
a. 83 percent
b. 40 percent
c. 33 percent
d. 3 percent
e. 1.2 percent
TRUE/FALSE (10 Questions):
178. Accounting is the process of systematically determining how much money a company owes the Internal
Revenue Service.
183. Audited financial statements guarantee that a firm has not "cooked" the books.
188. Management and employees are the groups that would be most likely to evaluate the risk associated with
investing in a company’s stocks, bonds, or securities.
193. Accounting information is, first and foremost, management information.
198. A private accountant is an accountant whose services may be hired on a fee basis by individuals or business
firms.
203. According to the accounting equation, cash, inventory, equipment, and real estate are classified as owners'
equity.
208. The information for a journal entry is written in the general or specialized journal; then a source document
for the transaction is prepared.
213. Current assets are assets that can be converted quickly into cash or that will be used in two years or less.
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218. For a corporation, the owners' equity amount is the total value of stock minus the retained earnings that
have accumulated to date.
223. Net income is the profit earned (or the loss suffered) by a firm during an accounting period after the cost of
goods sold and all expenses have been deducted from revenues.
228. When smart investors take a practical approach to evaluating a company’s accounting information, they
need only look at the snapshot data that a balance sheet offers as it will be the primary tool to guide
potentially profitable investments.
229. Footnotes in accounting documents can offer red flags for investors and should be read and paid close
attention to.
233. Dividing current assets by current liabilities gives the current ratio.
234. For small firms, the major difference between the current ratio and the acid-test ratio is that inventory is
subtracted from current assets in order to calculate the acid-test ratio.
235. The accounts receivable turnover estimates the number of times a firm sells and replaces its inventory each
year.
237. Most lenders would prefer to lend money to a firm that has a high debt-to- owners' equity ratio.
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Chapter 18
MULTIPLE CHOICE CASE 1 (1 Case):
Community Bank
Jeffrey is the training manager for the Community Bank in Maryland. Jeffrey has developed a training
program for all new employees that emphasizes understanding the basics of money. Jeffrey and the bank's
management believe that if the employees understand the basics of money, they can utilize the information
in their own personal finances as well as guide and answer questions from bank customers.
The bank recently hired Beth. She was hired at a high-level position because she brought with her extensive
bank management experience. Beth's responsibilities included making sure that the reserve requirement
would always be met and keeping track of the interest rate that the Federal Reserve System charged for
loans to member banks.
20. Refer to Community Bank. In his training, when Jeffrey suggests that money should retain its value over
time, which of the following characteristics is he referring to?
a. Difficulty of counterfeiting
b. Liquidity
c. Divisibility
d. Stability
e. Portability
21. Refer to Community Bank. In giving examples to new employees, Jeffrey has indicated that when
customers put their money in a bank, some are looking to retain and accumulate wealth. This refers to
which of the following functions of money?
a. Money as a measure of value
b. Money as a portable exchange
c. Money as a store of value
d. Money as a medium of exchange
e. Money as a clearinghouse
22. Refer to Community Bank. One employee asked Jeffrey how much money could be found in the whole
country. Jeffrey indicated that the government tracks this type of information via supply of money. What
are the main measures of the supply of money?
a. One: M1
b. Four: M1, M2, M3, M4
c. Two: M1, M2
d. Five: M1, M2, M3, M4, M5
e. Three: M1, M2, M3
23. Refer to Community Bank. Because of her previous banking experience, Beth knows that a reserve
requirement is
a. the percentage of its deposits a bank must retain, either in its own vault or on deposit with
its Federal Reserve District Bank.
b. the percentage of its loans a bank must retain with its Reserve District Bank as deposits.
c. the percentage of its deposits a bank must send in taxes.
d. the percentage of its credit card balance a bank must retain in the customers' accounts.
e. certain accounts a bank must reserve for really wealthy customers.
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24. Refer to Community Bank. One of Beth's responsibilities is keeping track of the interest rate that the Federal
Reserve System charges for loans to member banks. Which of the following should Beth be tracking?
a. Federal rate
b. FRS rate
c. Reserve rate
d. Discount rate
e. System rate
MULTIPLE CHOICE CASE 2 (1 Case):
M&B Bank
Ken is a senior manager at M&B Bank. Initially, he started as a front counter worker and slowly progressed
up the career ladder. In his role as a senior manager, Ken is keeping a keen eye on the industry, the Federal
Reserve System, and the bank's competitors. Ken's previous boss did not do that well, and as a result the
bank had suffered.
Several employees have pointed out that many businesses are not aware of the procedures for or a
systematic way to evaluate the creditworthiness of their customers, collect past-due payments from
customers, and protect their businesses from such losses. Based on feedback from several employees, M&B
has decided to offer credit-counseling workshops for individuals and small businesses.
25. Refer to M&B Bank. Ken was concerned about the method used by the Federal Reserve System to control
the money supply. He believed this would result in the bank having less money to lend to customers. Which
of the following methods refers to Ken's concern?
a. Increase the discount rate.
b. Decrease the reserve requirement.
c. Sell government securities.
d. Buy government securities.
e. Decrease the discount rate.
26. Refer to M&B Bank. M&B is chartered by the U.S. Comptroller of the Currency. M&B can be described as
which of the following?
a. Non-commercial bank
b. Regional bank
c. State bank
d. Credit union
e. National bank
27. Refer to M&B Bank. As Ken keeps an eye on the industry, he notices many changes. Which of the
following is not a change that Ken would have noticed or obtained information about?
a. Importance of customer service
b. Consolidation and mergers
c. Increased competition from nonbank competitors
d. Growth in online banking
e. Decrease in the use of credit cards and debit cards
28. Refer to M&B Bank. While offering the credit-counseling workshops, the facilitator lists the five Cs of
credit. Which of the following refers to the borrower's attitude toward credit obligations?
a. Capacity
b. Character
c. Collateral
d. Capital
e. Conditions
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29. Refer to M&B Bank. Which of the following options should be presented as a method for collecting from
customers who don't make scheduled payments?
a. Push for removal of payments.
b. Make telephone calls to urge prompt payment.
c. File a lawsuit right away to teach customers a valuable lesson.
d. Make collections a last priority since banking is all about relationships.
e. Make personal visits to customers' homes.
MULTIPLE CHOICE (10 Questions):
30. A system of exchange in which goods and services are traded directly for other goods and services is called
a(n) ____ system.
a. monetary
b. barter
c. exchange
d. mercantile
e. trading
40. Usually money is used as a
a. store of wealth.
b. means of payment.
c. medium of exchange.
d. measure of value.
e. All are acceptable uses of money.
50. If a subcultural group in Africa started its own country, it should not use tissue paper to print currency
because money should have
a. divisibility.
b. portability.
c. durability.
d. sustainability.
e. stability.
60. Dorothy Richards has a certificate of deposit for $40,000 at a local bank. This $40,000 would be included in
a. M1.
b. M2.
c. M3.
d. M1 and M2.
e. M1, M2, and M3.
70. During the recent economic crisis, the Fed took several important steps to attempt to minimize the effects of
the crisis for both businesses and individuals. Which of the following was not a step that the Fed took
during this time?
a. Expanded its network of district banks to 18
b. Provided liquidity
c. Supported troubled financial markets
d. Supported important financial institutions
e. Conducted stress tests for major banks
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80. Which of the following methods does the Federal Reserve System not use to control the money supply and
the economy?
a. Buys government securities and bonds
b. Increases the reserve requirement
c. Increases the discount rate
d. Lends money to private businesses
e. Sells government securities and bonds
90. One method the Federal Reserve System uses to slow the economy is to
a. sell government bonds to banks and other businesses.
b. decrease reserve requirements.
c. decrease the discount rate.
d. buy government securities.
e. decrease salaries paid to the board of governors.
100. The ____ requires lenders to clearly state the annual percentage rate and total finance charge for a consumer
loan.
a. Equal Employment Opportunity Act
b. Equal Pay Act
c. Truth-in-Lending Act
d. Civil Rights Act
e. Fair Credit Reporting Act
110. There are approximately ____ national banks in the United States.
a. 1,700
b. 2,200
c. 4,500
d. 5,000
e. 7,500
120. Pile & Joseph (P&J) Enterprises wants to obtain long-term financing for a commercial real estate project,
but it does not want to go to a regular bank for help. Which of the following institutions could help P&J?
a. Insurance company
b. Stock market
c. Local credit union
d. Board of governors of the Federal Reserve
e. Federal Reserve district bank
130. Judy Martinez, owner of Judy's Fashions, received a $12,000 tax refund. She deposited the money in Chase
Bank. The terms of the agreement are that she must leave the money on deposit for three years and the bank
will pay her 2.2 percent interest. Her account is a
a. checking account.
b. NOW account.
c. Super NOW account.
d. certificate of deposit.
e. commercial draft.
140. Real or personal property that a firm or individual owns and that is pledged as security for a loan is called
a. a security deposit.
b. a mortgage deposit.
c. an amortization.
d. collateral.
e. stocks and bonds.
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150. Brandy uses her debit card for most of her everyday purchases. The main reason she uses her debit card is
probably because
a. she does not want to pay for her purchases right away.
b. she finds it more convenient than writing checks.
c. her checking account balance is very low.
d. debit cards typically offer cash back bonuses.
e. she can wait for the bill to come.
160. York Department Store does 50 percent of its business on credit and frequently has to tolerate slow-paying
customers and those who simply do not pay. Now it would like to facilitate immediate cash purchases for
customers who don't like to write checks or to carry much cash with them. What would you recommend?
a. Buy an automated teller machine for the store.
b. Use an automated clearinghouse.
c. Buy a point-of-sale terminal for the store.
d. Use an electronic bank teller.
e. Tell the customers that when they are billed they must send a check or use the billpayment-by-telephone procedure.
170. Immediate purchasing power that is exchanged for a promise to pay at a later date is called
a. collateral.
b. purchasing power.
c. trust creation.
d. money value.
e. credit.
180. Which of the following organizations would provide credit reports for individuals?
a. Dun & Bradstreet
b. Credit Information Corporation of the United States
c. Equifax Credit Information Services
d. Federal Deposit Insurance Corporation
e. The Federal Reserve System
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TRUE/FALSE (10 Questions):
190. Inflation is a general rise in the level of prices.
200. All state banks must be members of the Federal Reserve Board.
210. In order to meet its reserve requirement, ABC Bank can borrow money from other banks at the federal
funds rate.
220. Savings and loan associations are supervised by the Office of Thrift Supervision, which is a branch of the
U.S. Treasury.
225. A short-term loan is a loan that usually will be paid back within one year or less.
230. For customers who do their banking solely online, the largest disadvantage is the increased security threat.
240. The NCUA insures all accounts of the Federal Reserve System.
242. Capital is a term used to refer to a borrower's financial ability to meet credit obligations and make regular
payments.
243. Collateral is more common with long-term loans than with short-term loans.
244. For information concerning businesses, the most widely used credit-reporting agency in the world is the
TransUnion Credit Information Company.
246. The Credit Card Act of 2009 provides new measures of accountability for credit card companies.
247. Very few borrowers follow lenders' repayment terms.
248. Harassment is illegal when attempting to collect outstanding payments.
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