Foundation of Business Test (Boone & Kurtz Ch.1, 2, 5, 6)

Business

All profit-seeking activities and enterprises that provide goods and services necessary to an economic system.

Profits

Rewards earned by businesspeople who take the risk involved in blending people, technology, and information to create and market want-satisfying goods and services. 

Not-for-profit organizations

Businesslike establishments that have primary objectives other than returning profits to their owners.

Factors of production

Land, labor, capital, and entrepreneurship.

Land

Used in the production of a good, and includes all production inputs or natural resources that come from the land and are useful in their natural states, such as oil, gas, minerals, and timber.

Labor

Anyone who works, including both the physical labor and the intellectual inputs contributed by workers.

Entrepreneurship

The willingness to take risks to create and operate a business.

Private enterprise system

An economic system that rewards companies for their ability to identify and serve the needs and demands of customers.

Capitalism

An economic system that rewards companies for their ability to perceive and serve the demands of customers; also called the private enterprise system.

Competition

A battle among businesses for consumer acceptance.

Competitive Differentiation

A unique combination of organizational abilities, products, and approaches that sets a company apart from competitors in the minds of consumers.

Private Property

The most basic freedom under the private enterprise system; the right to own, use, buy, sell, and bequeath land, buildings, machinery, equipment, patents, individual possessions, and various intangible kinds of property.

Entrepreneur

A person who seeks a profitable opportunity and takes the necessary risks to set up and operate a business.

Consumer Orientation

A business philosophy that focuses first on determining unmet consumer wants and needs before designing products to satisfy those needs.

Branding

A process of creating an identity in consumers' minds for a good, service, or company; a major marketing tool for a temporary business.

Brand

Name, term, sign, symbol, or some combination that identifies the products of one company and differentiates them from the competitors' offerings.

Transaction management

Building and promoting products in the hope that enough customers will buy them to cover the costs and earn a profit.

Relationship Era

A business era in which companies seek ways to actively nurture customers' loyalty by carefully managing every interaction.

Social Era

A business era in which companies seek ways to connect with customers using technology.

Relationship Management

A collection of activities that build and maintain ongoing, mutually beneficial ties with the customers and other parties.

Strategic Alliance

A partnership formed to create a competitive advantage for the businesses involved; international business, and a business strategy in which a company finds a partner in the country where it wants to do business.

Diversity

Blending individuals of different genders, ethnic backgrounds, cultures, religions, ages, and physical and mental abilities to enhance a company’s chances of success.

Outsourcing

Using outside vendors, contracting work out to another party, for the production of goods or fulfillment of services and functions previously performed in-house.

Offshoring

The relocation of business processes, both production and services, to lower-cost locations overseas.

Nearshoring

Outsourcing production of services to locations near a company's base or closer to customers.

Crowdsourcing

Enlisting the collective talent of a number of people to get work done.

Vision

The ability to perceive marketplace needs and what an organization must do to satisfy them.

Critical Thinking

The ability to analyze and assess information to pinpoint problems or opportunities.

Creativity

The capacity to develop novel solutions to perceived organizational problems.

Business Ethics

Standards of conduct and moral values regarding right and wrong actions in the work environment.

Social responsibilities

Business consideration of society's well-being and consumer satisfaction, in addition to profits.

Microeconomics

The study of small economic units, such as individual customers, families, and businesses.

Demand

The willingness and ability of buyers to purchase goods and services.

Supply

The willingness and ability of sellers to provide goods and services.

Economics

A social science that analyzes the choices people and governments make in allocating scarce resources.

Demand Curve

A graph of the amount of a product that buyers will purchase at different prices.

Supply Curve

A graph that shows the relationship between different prices and the quantities that sellers will offer for sale, regardless of demand.

Equilibrium Curve

The prevailing market price at which you can buy an item.

Macroeconomics

The study of a nation’s overall economic issues, such as how an economy maintains and allocates resources and how a government’s policies affect the standards of living of its citizens.

Pure competition

A market structure in which large numbers of buyers and sellers exchange homogeneous products and no single participant has a significant influence on price.

Monopolistic Competition

A market structure in which large numbers of buyers and sellers exchange heterogeneous products so each participant has some control over price.

Oligopoly

A market situation in which relatively few sellers compete, and high start-up costs form barriers to keep out new competitors.

Monopoly

A market situation in which a single seller dominates trade in a good or service for which buyers can find no close substitutes.

Regulated Monopolies

A market situation in which a local, state, or federal government grants exclusive rights in a certain market to a single firm.

Planned Economy

An economic system in which government controls determine business ownership, profits, and resource allocation to accomplish government goals rather than those set by individual firms.

Socialism

An economic system characterized by government ownership and operation of major industries such as communications.

Communism

An economic system in which all property would be shared equally by the people of a community under the direction of a strong central government.

Mixed market economics

An economic system that draws from both types of economies, to different degrees.

Privatization

The conversion of government-owned and operated companies into privately held businesses.

Recession

A cyclical economic contraction that lasts for six months or longer.

Productivity

A relationship between the number of units produced and the number of humans and other production inputs necessary to produce them.

Gross Domestic Product (GDP)

The sum of all goods and services within a country’s boundaries during a specific time period, such as a year.

Inflation

An economic situation characterized by rising prices caused by a combination of excess consumer demand and increases in the cost of raw materials, component parts, human resources, and other factors of production.

Core inflation rate

The inflation rate of an economy after energy and food prices are removed.

Hyperinflation

An economic situation characterized by soaring prices.

Deflation

The opposite of inflation, occurs when prices continue to fall.

Consumer Price Index (CPI)

The measurement of the monthly average change in prices of goods and services.

Producer Price Index (PPI)

The measurement of the monthly average change in prices of goods and services perceived by producers.

Unemployment rate

The percentage of the total workforce actively seeking work but currently unemployed.

Frictional Unemployment

Applies to members of the workforce who are temporarily not working but are looking for jobs.

Seasonal Unemployment

The joblessness of workers in a seasonal industry.

Cyclical Unemployment

People who are out of work because of a cyclical contraction in the economy.

Structural Unemployment

People who remain unemployed for long periods of time, often with little hope of finding new jobs like their old ones.

Monetary policy

Government actions to increase or decrease the money supply and change banking requirements and interest rates to influence bankers' willingness to make loans.

Expansionary monetary policy

Government actions to increase the money supply in an effort to lower the cost of borrowing, which encourages business decision makers to make new investments, in turn stimulating employment and economic growth.

Restrictive monetary policy

Government actions to reduce the money supply to curb rising prices, overexpansion, and concerns about overly rapid economic growth.

Quantitative Easing (QE)

An expansionary monetary policy whereby a central bank buys back predetermined amounts of government bonds or other financial assets to increase liquidity and stimulate the economy.

Fiscal Policy

Government spending and taxation decisions designed to control inflation, reduce unemployment, improve the general welfare of citizens, and encourage economic growth.

Budget

An organization’s plan for how it will raise and spend money during a given period of time.

Budget Deficit

A situation in which the government spends more than the amount of money it raises through taxes.

National Debt

Money owed by governments to individuals, businesses, and government agencies who purchase Treasury bills, notes, and bonds sold to cover expenditures.

Budget Surplus

Excess funding that occurs when government spends less than the amount of funds raised through taxes and fees.

Balanced Budget

A situation in which total revenues raised by taxes equal the total proposed spending for the year.

Small Business

Independent business with fewer than 500 employees, not dominating in its market.

Home-based business

A firm operated from the residence of the business owner.

Business plan

A written document that provides an orderly statement of a company’s goals, methods, and standards.

Small Business Administration (SBA)

The principal government agency concerned with helping small US firms.

Microloans

Small business loans often used to buy equipment or operate a business.

Business incubator

Local programs designed to provide low-cost shared business facilities, along with training, support, and networking, to small start-up ventures.

Venture capital

Money invested in a business by another business firm or group of individuals in exchange for an ownership share or equity stake.

Franchising

Contractual business arrangement between a manufacturer or other supplier and a dealer such as a restaurant operator or retailer.

Franchisee

An individual or business firm purchasing a franchise.

Franchisor

A firm whose products are sold to customers by the franchisee

Sole proprietorship

Business ownership in which there is no legal distinction between the sole proprietor’s status as an individual and his or her status as a business owner.

Partnership

An association of two or more persons who operate a business as co-owners by voluntary legal agreement.

Corporation

A legal organization with assets and liabilities separate from those of its owner/s

S-corporations

Corporations that don’t pay corporate taxes on profits; instead, profits are distributed to shareholders, who pay individual income taxes.

Limited-Liability Company (LLC)

It secures the corporate advantage of limited liability while avoiding the double taxation characteristics of a traditional corporation.

Benefit Corporation

A type of for-profit corporate entity that includes a positive impact on society and the environment as part of its defined goals.

Employee ownership

A business ownership in which workers own shares of stock in the company that employs them.

Not-for-profit corporations

An organization whose goals don't include pursuing a profit.

Stockholders

Owners of a corporation due to their purchase of stock in the corporation.

Preferred stock

Shares that give owners limited voting rights and the right to receive dividends or assets before owners of common stock.

Common stock

Shares that give owners voting rights but only residual claims to the firm’s assets and income distributions.

Board of Directors

Governing body of a corporation and elected by Stockholders

Merger

An agreement in which two or more firms combine to form one company.

Acquisition

An agreement in which one firm purchases another.

Vertical merger

A merger that combines firms operating at different levels in the production and marketing process.

Horizontal merger

A merger that joins firms in the same industry for the purpose of diversification, increasing customer bases, cutting costs, or expanding product lines.

Conglomerate merger

A merger that combines unrelated firms, usually with the goal of diversification, spurring sales, growth, or spending as cash surplus in order to avoid a takeover attempt.