Bruno Company

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Bruno Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.

BRUNO COMPANY
BALANCE SHEET
DECEMBER 31, 2012

Current assets
Cash $263,610
Accounts receivable (net) 343,610
Inventories (lower-of-average-cost-or-market) 404,610
Equity investments (trading)—at cost (fair value $121,800) 141,800
Property, plant, and equipment
Buildings (net) 571,800
Equipment (net) 161,800
Land held for future use 176,800
Intangible assets
Goodwill 83,610
Cash surrender value of life insurance 93,610
Prepaid expenses 15,610
Current liabilities
Accounts payable 136,800
Notes payable (due next year) 128,610
Pension obligation 83,800
Rent payable 52,610
Premium on bonds payable 56,610
Long-term liabilities
Bonds payable 501,800
Stockholders’ equity
Common stock, $1.00 par, authorized 400,000 shares, issued 293,610 293,610
Additional paid-in capital 183,610
Retained earnings ?

Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $163,610 and for the office equipment, $108,610. The allowance for doubtful accounts has a balance of $20,610. The pension obligation is considered a long-term liability. (List current assets in order of liquidity. List property plant and equipment in order of buildings and equipment.)

Multiple Choice Answers

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1. In the Southern sub region of sub-Saharan Africa, which country is mainly covered by the Kalahari
Desert?
A. Botswana
B. Zambia
C. Namibia
D. Mozambique

2. Which of the following is true of the Antarctic Treaty System?
A. It was established specifically to enforce ecological regulations.
B. It bans commercial mining in Antarctica.
C. It’s actually the Society for the Geographic Exploration of Antarctica.
D. It provides the de facto governance of the continent.

3. In the context of European colonization, Portugal controlled Mozambique and
A. Congo.
B. Angola.
C. Madagascar.
D. Kenya.

4. Which South African city is a regional hub of commerce and has South Africa’s premier international
airport?
A. Durban
B. Cape Town
C. Johannesburg
D. Pretoria

5. With respect to Australia’s aboriginal peoples, animistic religious beliefs are characterized by _______
worship.
A. nature
B. ancestor
C. sun
D. sky-god

6. In Oceania, most towns began as
A. tribal ritual centers.
B. capital cities.
C. plantations.
D. colonial ports.

7. When the Australian economy was based on import-substitution manufacturing,
A. expansionist policies were emphasized.
B. domestic manufacturing was discouraged.
C. protectionist policies were emphasized.
D. domestic production assured national prosperity.

8. According to the World Health Organization (WHO), AIDS is listed as the _______ main cause of global
deaths.
A. fourth
B. second
C. eighth
D. third

9. With respect to global connections, association with _______ offers the brightest immediate future for
many African countries.
A. China
B. the European Union.
C. the United States.
D. India

10. Australian vegetation is dominated by various species of acacia and
A. eucalyptus.
B. cacti.
C. ores.
D. marsupials.

11. In Australia, most cattle ranching is found in
A. New South Wales.
B. Victoria.
C. South Australia.
D. Queensland.

12. As of 2008, the population of Australia was 21.3 million, and the population of New Zealand was
closer to ________ million.
A. 10
B. 4
C. 8
D. 12

13. Mensa Musa was the famed emperor of
A. Ghana.
B. Mali.
C. Songhai.
D. Fulani.

14. Which statement best characterizes animism?
A. It’s composed of irrational superstitions that arise in underdeveloped rural communities.
B. It combines natural, human, and spiritual forces.
C. It’s the basis of social status within a tribe.
D. It’s a religion that maintains the futility of human existence.

15. Moving from coastal to interior regions of sub-Saharan Africa, we discover that the dominant physical geographic
feature is
A. many coastal inlets.
B. lush rainforest.
C. mountainous terrain.
D. ascending plateaus.

16. What are the “many islands” people also called?
A. Melanesians
B. Micronesians
C. Polynesians
D. Aborigines

17. The largest island of the more densely populated southwestern Oceanic island group is
A. Vanuatu.
B. New Caledonia.
C. Papua New Guinea.
D. Fiji.

18. Slum areas called shantytowns occur in _________ major African cities, housing over _________
percent of urban populations.
A. five major; 50
B. some; 40
C. all; 70
D. nearly all; 60

19. In the 1970s, the island of Nauru had one of the highest per capita incomes in the Oceania region due to extensive _______ mining.
A. nickel
End of exam
B. phosphate
C. gold
D. copper

20. The lowlands west of Australia’s eastern mountain range are drained by the Murray-Darling River
system, with its main headwaters in the Great _______ Basin.
A. Dividing
B. Barrier
C. Darling
D. Artesian

Multiple Choice Answers

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Question 1
Sales letters require the use of the:
A. indirect approach.
B. direct approach.
C. persuasive approach.
D. common approach.

Question 2
“Start with the good news” is the basic rule in the:
A. indirect approach.
B. direct approach.
C. persuasive approach.
D. sales approach.

Question 3
When you put the bad news in the middle of your message, you are using the:
A. indirect approach.
B. direct approach.
C. persuasive approach.
D. sales approach.

Question 4
The purpose of the “buffer paragraph” is to:
A. set the stage for giving good news.
B. provide background for a request for action.
C. smooth the way for an unpleasant message.
D. give the negative attitude a prominent position.

Question 5
The written business message is successful only if the receiver:
A. is given what he or she has requested.
B. reacts favorably to it.
C. continues to do business with the organization.
D. contacts you immediately.

Question 6
The “call for action” is at the end of the message in the:
A. direct approach.
B. indirect approach.
C. persuasive approach.
D. explanatory approach.

Question 7
When composing a first draft:
A. check the grammar.
B. use the spell check.
C. concentrate on content.
D. revise the wording.

Question 8
Routine replies to inquiries and requests should follow the:
A. direct approach.
B. indirect approach.
C. persuasive approach.
D. sales approach.

Question 9
The refusal in negative communications should:
A. be stated explicitly or implied clearly.
B. be stated in at least two ways.
C. be stated in the middle and final paragraphs.
D. not be explicitly stated.

Question 10
Which is NOT part of the message planning process?
A. Identify the purpose of the communication.
B. Decide where to sit if you’re the main speaker.
C. Identify the intended audience.
D. Determine the content of the communication.

Question 11
Which is an INCORRECT statement about writing a rough draft?
A. Edit and correct the rough draft after it is completed.
B. Prepare the letter in draft form first.
C. Proofread the draft for tone, “you” attitude, and word choice.
D. Don’t waste time editing since most people’s first thoughts are their best.

Question 12
Which is NOT part of the AIDA plan?
A. Interest
B. Action
C. Decision
D. Attention

Question 13
The largest amount of daily, routine correspondence is:
A. correspondence that requests or transmits information.
B. correspondence that answers complaints.
C. thank-you letters.
D. acknowledgments of orders.

Question 14
The most challenging or problematic communications in business are those that:
A. refer the customer to another area.
B. admit that the company has made a mistake.
C. refuse the receiver’s request.
D. allow the customer to make a deal.

Question 15
In the negative letter, the last paragraph should:
A. state reasons for the refusal.
B. offer a counter proposal or alternative.
C. restate the refusal.
D. apologize.

Question 16
If you describe how the recommendation, product, or service would benefit the receiver, you are trying to arouse:
A. attention.
B. interest.
C. desire.
D. action.

Question 17
Of the following, the best ending for a letter using the persuasive approach is:
A. a request for action.
B. a thank you in advance.
C. to state a benefit to the receiver.
D. a question.

Question 18
Of the following, the best description of the middle paragraph(s) of a letter using the direct approach is:
A. the reselling of the organization/product/service.
B. an explanation or details.
C. a call for action.
D. to build goodwill.

Question 19
In a bad-news letter, the negative information should be:
A. presented in the first paragraph.
B. placed immediately following the explanation.
C. summarized in the last paragraph.
D. avoided completely.

Question 20
If you are writing a letter of recommendation, you should use the:
A. direct approach.
B. indirect approach.
C. persuasive approach.
D. explanatory approach.

Multiple Choice Answers

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1. 40 is 50% of 80.
True or False

2.  37% is written this way as a decimal.
a. .037
b. .37

3. The simple interest earned on $1200, invested at 5.5%, for 3 months, is:
a. $161.50
b. $16.50

4. 16 is 50% of 32.
True or False

5. 10% of 80 is .08.
True or False

6. The simple interest earned on $400 invested at 8.5% for 2 years is:
a. $6.80
b. $68.00

7. The sales tax rate in a state is 5%. What is the total price paid for a pair of shoes that cost $16.00
a. $16.80
b. $.80

8. 7 ¼ % written as a decimal is .725.
True or False

9. What is 66 2/3 % of 54
a. 36
b. 360

10. In a certain week, the London stock market went down from 1740 to 1653. The percent decrease, to the nearest percent, is 5%.
True or False

Multiple Choice Answers

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1. One key to success with a business startup is to begin with enough ________________:
capital
sales
accounts payable
suppliers

2. Researchers who study entrepreneurs have discovered that:
successful entrepreneurs start with an idea, resources, and a small management team.
there is one key set of traits that mark a successful entrepreneur.
entrepreneurs desire responsibility and are willing to take moderate risks.
the most successful entrepreneurs are willing to take extreme risks and bet the farm in order to succeed.

3. Entrepreneurs start businesses for a number of reasons including:
an opportunity to make a difference.
having to deal with less government regulation than as an executive of a large company.
a much lower risk of career failure due to layoff or acquisition than working for a large company.
the opportunity to get rich much quicker than if they work for a large company.

4. “Copreneurs” are marked by:
a division of labor by expertise.
their similarity to the traditional mom and pop operation.
a decline in the number of businesses.
a greater success at raising venture capital than sole proprietorship-type businesses.

5. Successful copreneurs are marked by which of the following characteristics?
Distinct and different business and life goals.
A clear delineation of who is the superior partner and who is the subordinate partner.
A blending of responsibilities, roles, and authority.
Mutual respect for each other’s talents.

6. The international market:
has proven to be a tremendous opportunity for small business.
is being dominated by large corporations based in Europe and Japan.
is largely closed to small U.S.-based businesses because of the growth of international entrepreneurship.
provides greater opportunities for women and minority entrepreneurs than U.S. domestic markets do.

7. Entrepreneurial activity is culturally diverse. Discuss the role of women, minorities, and immigrant entrepreneurs in this activity, profiling their characteristics, their impact, and the specific barriers they need to overcome in their small business start-ups.

8. What can an entrepreneur do to avoid the failure of his/her company? Discuss at least six actions they can take.

9. How is the strategic planning process for small companies different from that for large companies?
The planning horizon should cover at least five years into the future.
The process should begin with setting objectives and conclude with competitive analysis.
The process should be informal and not overly structured-“a shirtsleeve approach.”
It should be conducted by top management and provided to lower management.

10. A small business owner needs to remember that when it comes to employee involvement in the strategic planning process:
involvement is a prerequisite for the achievement of total employee commitment.
his/her employees look to him/her for leadership and do not want to be involved.
the delegation of authority is not as important as communicating a clear vision.
employees do not need to be involved in the strategic process but do need to be involved in the operational process.

11. The strategic planning process for small businesses is:
market-focused.
the same as it is for a large company.
generally done by top management with little or no participation by employees.
product-focused and similar to that for large companies.

12. The principle behind a ________________ strategy is to select one or more market segments, identify customers’ special needs, and approach them with a good or service designed to excel in meeting these needs.
cost-leadership
differentiation
focus
concentration

13. A competitive profile matrix:
identifies a firm’s core competencies.
permits the small business owner to divide a mass market into smaller, more manageable segments.
compares the firm’s and its competitors’ key success factors.
creates a road map of action for the entrepreneur in order to fulfill his/her company’s mission, goals, and objectives.

14. The strategic management process:
is especially difficult for the small business because of its limited resources.
divides mass markets into smaller, less homogeneous units.
provides the small business owner with the tools for managing the uncontrollable elements in the external business environment.
helps a small business develop the game plan that guides it in creating its mission, vision, goals, and objectives.

15. Once the vision and mission are established, the entrepreneur needs to:
select the target market.
conduct market research.
choose a competitive strategy.
assess the firm’s strengths and weaknesses.

16. ________________ are negative external forces that inhibit the firm’s ability to achieve its objectives.
Strengths
Weaknesses
Opportunities
Threats

17. Which of the following is a danger in choosing a differentiation strategy?
Charging a price so high that the company prices itself out of the market.
Choosing a basis for price leadership that is essentially unimportant to the customer.
Choosing a market that is not large enough to be profitable.
An overfocus on overhead costs.

18. When the small business owner assesses her company’s strengths and weaknesses, she is dealing with the ________________ business environment.
macro
external
competitive
internal

19.Briefly describe the advantages and disadvantages of buying an existing business.

20. What is the importance of positioning for the small business?

21. Describe core competencies and the role they play in helping the company segment its market and develop effective competitive strategies.

22. A master franchise is also called:
sub-franchise.
area developer.
Both A and B
None of the above

23. The FTC’s philosophy focuses on:
catching and prosecuting abusers of franchise laws.
verifying the accuracy of FDD information.
providing information to prospective franchisees and helping them make good decisions.
licensing prospective franchisers.

24. The franchiser has the right to cancel a contract if a franchisee:
declares a bankruptcy.
fails to make required payments on time.
fails to maintain quality standards.
All of the above

25. The most expensive franchises in terms of total investment are:
retail franchises.
business service franchises.
McDonald’s franchises.
hotel and motel franchises.

26. __________ franchising involves providing the franchisee with a complete business system–the established name, the building layout and design, accounting systems, etc.
Product distribution
Trade name
Pure
Conversion

27. A significant advantage a franchisee has over the independent small business owner is participation in the franchiser’s __________.
centralized and large-volume buying power
social gatherings
profits
policies

28. The __________ requires all franchisers to disclose detailed information on their operations at the first personal meeting or at least fourteen days before a franchise contract is signed or any money is paid.
FCC
FDD
Trade Regulations Rule
FDA

29. In franchising, the reputation of the franchiser is dependent on:
their locations and popularity with the local customer.
the brand name recognition and appeal.
the rate of growth and the number of national outlets.
the quality of the goods and services provided.

30. The success of franchising is largely due to:
the economic growth of the United States and other developed nations, economies.
more college students choosing to go to work for themselves rather than for corporations.
the mutual benefits it provides to the franchiser and franchisee.
All of these factors

31. What clues should you look for that should arouse your suspicions regarding the honesty and legitimacy of a franchise? Identify at least eight.

32. Describe the key trends that will affect franchising over the next decade.

33. One advantage of buying an existing business is:
you always get the best location.
the opportunity to participate in a national advertising campaign.
equipment is installed and production capacity is known.
easy implementation of innovations and changes from past policies.

34. It is important to remember when assessing the financial soundness of a company that:
if profits are adequate, there will be sufficient funds to pay salaries and fund cash flow.
cash flow is the key financial element in determining financial soundness.
revenues need to equal twice the debt load in order for the company to be viable.
the buyer is buying the past revenues and profits of the company.

35. The biggest source for the best companies to buy is:
business brokers.
commercial bankers.
trade associations.
the hidden market.

36. The valuation method that is commonly used, but tends to oversimplify the valuation process, is called:
the excess-earnings method.
the balance sheet method.
the capitalization method.
the market approach.

37. Which of the following is a way to smooth the transition of leadership/management from the seller of a business to the buyer?
Focus on the customer, offer new incentives, improve customer service.
Focus on the employees, listen to them, keep them informed.
Concentrate on operations, updating equipment and changing processes.
Visit your competitors and introduce yourself and get to know them.

38. The capitalized earnings approach determines the value of a business by capitalizing its expected profits using:
the rate of return reflecting the risk level.
the prime interest rate.
the normal rate of return.
the prevailing rate of inflation.

39. The first step an entrepreneur should take when acquiring an existing business is to:
explore financing options.
prepare a list of potential candidates.
analyze his/her skills, abilities, and interests in an honest self-audit.
contact existing business owners in the area and ask if their companies are for sale.

40. When negotiating the deal, the most important thing to remember is:
terms are more important than the price paid.
to negotiate the lowest possible price.
often the difference in available funds can be made up by collecting accounts payable.
the owner of the business always asks 14-22% more than he/she is willing to take.

41. Review the five key legal issues an entrepreneur needs to consider when evaluating an existing business.