MGMT 1 week 2

Enterprise zones are:

government-owned properties that are available for entrepreneurial ventures at a reduced cost.
specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas.
similar to incubator facilities but strictly run by city and state governments.
blighted areas that contain toxic materials making them unsuitable for business operations.

specific locations across the US where entrepreneurs can set up shop and receive tax breaks for operating in these area Enterprise zones are geographic areas where the government would like to encourage business development. City and state governments will provide business owners tax concessions for developing businesses in these area.

Maria has a lot of self-confidence and business knowledge. She recently opened a bakery as a sole proprietor. She is expecting a high level of profits and is looking forward to:

keeping all of the money she earns since she does not have to pay taxes as a sole proprietor.
keeping all of the money she earns except for the taxes she is required to pay.
easily raising additional large sums of money from the capital markets since she is a sole proprietor.
the lower corporate tax rate paid by sole proprietorships.

keeping all of the money she earns except for the taxes she is required to pay One of the advantages of a sole proprietorship is the retention of company profit. The owner can earn as much as possible and not have to share that money with anyone else except the government, in taxes.

Sergio has agreed to become a partner in his brother’s horse-breeding business. Since he provided 30 percent of the money to start the firm and built an air-conditioned barn, he is entitled to 30 percent of any profits the firm earns during its first year of operation.

True
False

false The division of profits in a partnership is negotiable and is not necessarily tied to the amount of the initial investment.

The significance of the critical path on a PERT chart is that it identifies the least costly method of producing a given product.

True
False

false The critical path on a PERT chart identifies the sequence of events in a project that takes the longest time to complete.

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner’s personal income tax rate.

True
False

true The profits of a sole proprietorship are passed through to the owner, and taxed at the owner’s personal tax rate. However, owners do have to pay self employment tax (for Social Security and Medicare). By law, sole proprietors are required to estimate their taxes and make quarterly payments to the government or suffer penalties for nonpayment.

Zach and Mac own an auto repair business that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Zach and Mac operate as a ________.

limited partnership
cooperative
general partnership
joint venture

general partnership Since Zach and Mac operate the business as co-owners, they have formed a general partnership. Since both will manage the firm and accept unlimited liability, they are both general partners.

A firm that is certified as meeting both ISO 9000 and ISO 14000 standards has demonstrated:

-sound financial and marketing practices.
-ethical treatment of both customers and employees.
-that its recruitment and training programs for employees protect and promote basic human rights.
-world-class management of both quality and environmental standards.

world class management of both quality and environment standards ISO 9000 refers to quality management and assurance standards and ISO 14000 refers to standards for managing a firm’s environmental impact.

Jake is an innovative engineering graduate who works for a large company that makes adhesive products for commercial and consumer use. One of his primary responsibilities is to initiate and develop new products to complement the firm’s current product line. Jake’s company is _________.

at a disadvantage because it is trying to operate like a small business
intrapreneurial
an outside consultant for other firms
entrepreneurial

intrapreneurial Intrapreneurs are creative people who work as entrepreneurs within corporations to create new products that will provide returns on investment.

The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

True
False

false The owners/stockholders elect a Board of Directors, who hire the officers of the corporation and oversee major policy issues. The owners/stockholders thus have some say in who runs the corporation but have little to no control over the daily operations.

Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.

True
False

false A disadvantage of the corporate form of business ownership is double taxation. If corporations distribute after-tax profits to stockholders, these individuals are required to pay taxes on dividend income. Unfortunately, these amounts were already taxed once, when the corporation paid taxes on them, hence the term double taxation.

To strengthen its manufacturing base in the future, U.S. will have to:

continue to innovate.
uncover lower wage workers in the U.S. to compete with China.
support students in high school and college interested in studying the arts.
cut the amount of benefits offered to workers.

continue to innovate According to many analysts the U.S. will have to innovate to be able to strengthen its manufacturing base.

Improvements in technology have significantly increased the quality of products, as well as helped reduce costs.

True
False

true The introduction of CAD (computer-aided design), CAM (computer-aided manufacturing), and CIM (computer integrated manufacturing) has increased the quality of the product (output) and the time it takes to produce custom-designed products. It has reduced the cost of labor, and decreased waste in the production process.

Lean manufacturing ___________ productivity.

increases
decreases
has no effect on
removes the need for added

increases A company becomes lean by continuously increasing its capacity to produce high-quality goods while decreasing its need for resources.

If a corporation distributes after-tax profits to its stockholders in the form of dividends, the government considers these distributions as part of each stockholder’s personal income. Stockholders pay taxes on these distributions.

True
False

true A disadvantage of the corporate form of business ownership is double taxation. If corporations distribute after-tax profits to stockholders, these individuals are required to pay taxes on this income. Unfortunately, these amounts were already taxed once, when the corporation paid taxes on them.

As opposed to venture capitalists, angel investors prefer to target their investments in new firms requiring large sums of money.

True
False

false Venture capitalists often invest in businesses in need of large sums of money. Angel investors are private individuals investing their own money. The amount of money invested by angel investors tends to be less than amounts invested by venture capital firms.

Which of the following is an important part of operations management?

Choosing the best location for a firm’s facilities
Developing the best advertising strategy to promote a firm’s products
Deciding whether to pay a dividend to the firm’s stockholders
Determining the best means of financing the firm’s operations

choosing the best location for a firm’s facilities Operations management includes such responsibilities as facilities location, facilities layout, and quality control.

As a high net worth individual, Allison searches for growth firms in need of additional funding to achieve their goals. In return for this __________, Allison expects to assume ownership in the business.

analysis
corporate loan
venture capital
securities investment

venture capital A venture capitalist is an individual or firm that provides start-up capital in exchange for a stake in the ownership of the business.

The strategy of investors who are attempting a leveraged buyout is to:

use investment tax credits from the government to acquire all of the physical assets owned by the firm.
use debt to finance the buyout of the firm’s stockholders and gain control of the firm themselves.
shape up the company for quick resale.
secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock.

use debt to finance the buyout of the firm’s stockholders and gain control of the firm themselves In a leveraged buyout, the objective of the investors is to use debt financing to gain control of the firm’s stock for themselves.

When writing a business plan, prospective entrepreneurs should remember to omit details regarding their experience and education since investors are only interested in the proposed business.

True
False

false A business plan should include information about the resources and qualifications of the owner.

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

True
False

true One of the most important tasks to achieve before forming a partnership is to create a partnership agreement. The partnership agreement addresses a number of rules that will govern the activities of the partnership, including but not limited to: the duties of each partner; the rules for adding partners; contributions by each partner; and, how profits will be distributed.

Entrepreneurs applying for a bank loan should realize that bankers will:

offer only short-term financing.
expect to receive a share of ownership in the business in exchange for their loan.
expect the entrepreneur to provide a business plan.
generally make loans only to small businesses in dot-com related industries.

expect the entrepreneur to provide a business plan A well-prepared business plan is mandatory when seeking financial assistance from a bank or other investors.

Successful entrepreneurs are self-nurturing. This means they:

look to others for strength and encouragement.
perform all business operations by themselves.
believe in themselves and their ideas.
self-finance their business with no assistance from others.

believe in themselves and their ideas Self-nurturing individuals have the ability to believe in an idea when no one else does, and to replenish their enthusiasm.

To be successful, entrepreneurs are dependent on the support of others for encouragement.

True
False

false Entrepreneurs must be self-nurturing. They must believe in their ideas when others do not.

SitRite Furniture Company uses labor and machinery to transform wood, plastic, metal and cloth into comfortable chairs, sofas, and love seats. This process creates:

place utility.
use facility.
form utility.
intangible productivity.

form utility Production is the creation of finished goods and services from inputs such as land, labor, capital, entrepreneurship and knowledge. Production creates form utility, which is the value added by the creation of finished goods and services.

Successful entrepreneurial teams:

quickly organize themselves like large corporations.
assign only one person to new product innovation.
bring a variety of talent to the business venture.
outsource most of the details of innovation.

bring a variety of talent to the business venture As its name implies, members of an entrepreneurial team operate as a team. Everyone works together to conceive, develop, and market the product. Team members can combine their talents and creative skills, and bring a variety of expertise to the team.

If you have managerial skills and leadership ability, you also posses the personality to be an entrepreneur.

True
False

false

A basic characteristic of flexible manufacturing is that it:

achieves its flexibility at the cost of much slower rates of production than mass production techniques.
is only possible when using mass-production processes.
relies heavily on labor, since humans are more adaptable than machines.
uses machines designed to perform multiple tasks so they can be used to produce a variety of products.

uses machines designed to perform multiple tasks so they can be used to produce a variety of products Flexible manufacturing uses machines designed to perform multiple tasks so that they can produce a variety of products.

Operations managers at Alumax Corporation have found that they can achieve efficient production only by producing very large quantities of aluminum without shutting down the production process. This indicates that Alumax should use a(n) ___________ production process.

intermittent
continuous
systematic
assembly

continuous A continuous production process is characterized by long production runs over a period of time.

Dane is a stockholder in SmallWorld, Inc., a C corporation that manufactures amusement park rides. The company recently lost a major court decision and will probably be forced into bankruptcy. In fact, the damages awarded are so great that, even if all company assets are sold and the proceeds are used to pay its debts, SmallWorld is likely to still owe money to its creditors. If SmallWorld goes bankrupt, Dane and the other stockholders will:

be personally responsible for all remaining debts.
lose their investment but nothing else.
automatically qualify for federal reimbursement for any losses suffered by the firm.
be entitled to full reimbursement of any investment losses.

lose their investment but nothing else Owners of a corporation have limited liability. This means that the most they can lose is the amount they invest in the corporation.

Jason recently graduated with a degree in operations management from a respected university. The knowledge he gained and skills he developed while obtaining this degree could make him an attractive employee for either a manufacturing firm or a service firm.

True
False

true Operations management is a broad term that encompasses the tasks involved in creating both intangible products (services) and tangible goods. Thus, firms in both the service sector and the manufacturing sector may be interested in hiring Jason.