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GEB1101:M2-C13.14.15.16: Information, Acctg and Finance & Dist. and Promotion of Products

Examine why it is important for a business to use social media.
Millions of people of all ages use social media to interact with people and share ideas, personal information, and information about products and services. Today of U.S. adults use some sort of social media platform like Facebook, LinkedIn, Google+, Twitter, or Pinterest according to a recent Pew Internet Research Study. The primary reason for using social media is to stay in touch with family and friends. Other reasons include reconnecting with friends and posting messages about what’s in their lives. Early on, companies saw the potential in the sheer numbers of people using social media. Even though companies have used social media to share information about their products and services and improve customer service, many are still uncomfortable with this new method of communicating with customers because they do not have much control over what is said about their products or services.
Discuss how businesses use social media tools.
Companies use social media to connect with customers, listen to stakeholders, provide customer service, provide information to customers, and engage customers in product development. To share social content (information about products and services), companies can use blogs, photos, videos, and podcasts. In addition, social media also enables shoppers to access opinions, recommendations, and referrals from others within and outside their own social circle. Rating and review sites are based on the idea that people trust the opinions of others when it comes to purchasing products and services. Social games are another area of growth in social media. A social game (like Angry Birds or FarmVille) is a multiplayer, competitive, goal-oriented activity with defined rules of engagement and online connectivity among a community of players. While some businesses elect to create their own game, others choose to place advertising into a game.
Explain the business objectives for using social media.
Although its popularity is a recent phenomenon, many businesses are already using social media to achieve important goals and objectives. In fact, there are many ways for businesses to use social media to take advantage of business opportunities to build connections with other businesses and consumers. For example, businesses can use social media to build a community. Social media communities are social networks based on the relationships among people. Today, there are social communities for every interest, ethnic group, and lifestyle. Different types of communities include both forums and wikis. Other reasons for using social media include crisis and reputation management, listening to stakeholders, targeting customers, social media marketing, generating new product ideas, and recruiting employees. For a business, social media marketing is especially important because it can not only develop customer awareness, but also obtain sales leads and increase actual sales.
Describe how businesses develop a social media plan.
Before developing a plan to use social media, it is important to determine how social media can improve the organization’s overall performance and how it “fits” with a company’s objectives and other promotional activities. Once it is determined how social media links to the company’s other activities, the first step is to listen to what customers like and don’t like about a company’s products or services. Typically, the second step is to establish social media objectives that are specific, measurable, achievable, realistic, and time oriented. After listening and establishing objectives, the third step is to identify the customer or market segment a business is trying to reach with a social media promotion. The fourth step is to select the social media tool that will be used to reach customers. While it is not necessary (or even advisable) to use all of the available tools, a company can use social media communities, blogs, photos, videos, podcasts, or games to reach potential or existing customers. Once social media tools have been identified, a company can implement and integrate the social media plan.

Both quantitative and qualitative measurements can be used to determine the effectiveness of a social media plan. Quantitative social media measurement consists of using numerical measurements. Key performance indicators (KPIs), for example, are quantitative measurements. Qualitative measurement is the process of accessing the opinions and beliefs about a brand and primarily uses sentiment analysis to categorize what is being said about a company. Because social media costs both time and money, it is important to maintain, update, and measure the success of a social media plan and make adjustments and changes if needed.

Explain the meaning of e-business.
e-Business, or electronic business, can be defined as the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs through the facilities available on the Internet. The human, material, information, and financial resources that any business requires are highly specialized for e-business. In an effort to reduce the cost of e-business resources, many firms have turned to outsourcing.

Using e-business activities, it is possible to satisfy new customer needs created by the Internet as well as traditional ones in unique ways. Meeting customer needs is especially important when an e-business is trying to earn profits by increasing sales and reducing expenses. Each source of revenue flowing into the firm is referred to as a revenue stream.

Understand the fundamental models of e-business
e-Business models focus attention on the identity of a firm’s customers. Firms that use the Internet mainly to conduct business with other businesses generally are referred to as having a business-to-business, or B2B, model. When examining B2B firms, two clear types emerge. In the first type of B2B, the focus is simply on facilitating sales transactions between businesses. A second, more complex type of the B2B model involves a company and its suppliers. In contrast to the focus of the B2B model, firms such as Amazon or eBay clearly are focused on individual buyers and are thus referred to as having a business-to-consumer, or B2C, model. In a B2C situation, understanding how consumers behave online is critical to the firm’s success. Successful B2C firms often make a special effort to build long-term relationships with their customers. While B2B and B2C models are the most popular e-business models, there are other models that perform specialized e-business activities to generate revenues (see Table 14-2)
Identify the factors that will affect the future of the Internet, social media, and e-business
Since the beginning of commercial activity on the Internet, developments in computer technology, social media, and e-business have been rapid and formidable. Although a number of technology companies struggled or even failed during the economic crisis, most firms involved in computer technology, social media, and e-business today use a more intelligent approach to development. The long-term view held by the vast majority of analysts is that use of the Internet will continue to expand along with related technologies. Because approximately of Americans now have access to the Internet, potential growth is limited in the United States. On the other hand, only of the people in the world use the Web. Clearly, the number of Internet users in the world’s developing countries is expected to increase dramatically.

The future of computer technology and the Internet will be influenced by advances in technology, the increasing popularity of social media, and the increasing use of e-business. Other factors including ethics, social responsibility, and Internet crime will all impact the way that businesses and consumers use computer technology and the Internet. Although the environmental forces at work are complex, it is useful to think of them as either internal or external forces that affect how businesses use computer technology. Internal environmental forces are those that are closely associated with the actions and decisions taking place within a firm. In contrast, external environmental forces are those factors affecting an e-business originating outside an organization.

blog
a website that allows a company to share information in order to not only increase the customer’s knowledge about its products and services, but also to build trust
business model
represents a group of common characteristics and methods of doing business to generate sales revenues and reduce expenses
business-to-business (or B2B) model
a model used by firms that conduct business with other businesses
business-to-consumer (or B2C) model
a model used by firms that focus on conducting business with individual consumers
cloud computing
a type of computer usage in which services stored on the Internet is provided to users on a temporary basis
cookie
a small piece of software sent by a website that tracks an individual’s Internet use
crowdsourcing
outsourcing tasks to a group of people in order to tap into the ideas of the crowd
data mining
the practice of searching through data records looking for useful information
e-business (electronic business)
the organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society’s needs through the facilities available on the Internet
forum
an interactive version of a community bulletin board that focuses on threaded discussions
green IT
a term used to describe all of a firm’s activities to support a healthy environment and sustain the planet
inbound marketing
a marketing term that describes new ways of gaining attention and ultimately customers by creating content on a website that pulls customers in
key performance indicators (KPIs)
measurements that define and measure the progress of an organization toward achieving its objectives
malware
a general term that describes software designed to infiltrate a computer system without the user’s consent
media sharing sites
allow users to upload photos, videos, and podcasts
Millennials
tech-savvy digital natives born after 1980
outsourcing
the process of finding outside vendors and suppliers that provide professional help, parts, or materials at a lower cost
podcasts
digital audio or video fles that people listen to or watch online on tablets, computers, mp3 players, or smartphones
qualitative social media measurement
the process of accessing the opinions and beliefs about a brand and primarily uses sentiment analysis to categorize what is being said about a company
quantitative social media measurement
using numerical measurements, such as counting the number of website visitors, number of fans and followers, number of leads generated, and the number of new customers
revenue stream
a source of revenue flowing into a firm
sentiment analysis
a measurement that uses technology to detect the moods, attitudes, or emotions of people who experience a social media activity
social content sites
allow companies to create and share information about their products and services
social game
a multiplayer, competitive, goal-oriented activity with defined rules of engagement and online connectivity among a community of players
social media
the online interactions that allow people and businesses to communicate and share ideas, personal information, and information about products and services
social media communities
social networks based on the relationships among people
social media marketing
the utilization of social media technologies, channels, and software to create, communicate, deliver, and exchange offerings that have value for an organization
wiki
a collaborative online working space that enables members to contribute content that can be shared with other people
Why Is Social Media Important?
A recent Pew Internet Research study showed that
more than two-thirds of online adults use some sort of
social media platform like Facebook, LinkedIn, or
Twitter
Why Businesses Use Social Media
While there are many reasons a business chooses to use social media, the number one reason is that social media generates exposure for a business.
The 5 Most Important Benefits for a Business that Uses Social Media
1. Increased exposure for my business – 85%
2. Increased traffic – 69%
3. Provided marketplace insight – 65%
4. Generated ideas – 58%
5. Developed loyal fans – 58%

SocialMediaExaminer.com
2012 Social Media Marketing Industry Report

Social Media Tools for Business Use
Social Content Sites – Allow companies to create and share information about their products and services.

Blog – a website that allows a company to share information in order to not only increase the customer’s knowledge about its products and services, but also to build trust.

Photos, Videos, and Podcasts –
–Media sharing sites allow users to upload multimedia content
–Photo sharing provides a method for companies to tell a compelling story about its products or services
–Entertainment companies post movie trailers; companies like Home Depot post do-it-yourself videos
–Podcasts are like radio shows that are distributed through various means and not lined to a scheduled time period

Social Media Ratings – Shoppers are able to access opinions, recommendations, and referrals from others within and outside of their own social circles.

Social Games – A multiplayer, competitive, goal-oriented activity with defined rules of engagement and online connectivity among a community of players

Achieving Business Objectives Through Social Media
1. Social Media Communities
2. Crisis & Reputation Management
3. Listening to Stakeholders
4. Targeting Customers
5. Social Media Marketing
6. Digital Marketing
7. Generating New Product Ideas
8. Recruiting Employees
The Top 4 Social Media Networking Sites used by Businesses

SocialMediaExaminer.com
2012 Social Media Marketing Industry Report

For businesses using social media, the most popular social networking sites are Facebook, Twitter, LinkedIn and blogs.

Facebook – 92%
Twitter – 82%
LinkedIn – 73%
Blogs – 61%

Digital marketing
1. Online public relations—developing social media press kits
2. Search engine optimization—using keywords in the Web site in order to rank higher in search engine results
3. Search engine marketing—buying ads like Google’s AdWords to increase traffic to a company’s Web site
4. Display advertising—buying banner ads
5. e-mail marketing—targeting customers through opt-in email campaigns
6. Content marketing—developing photos, videos, podcasts, blog posts, and other tools to increase the value to the customer
Generating New Product Ideas
Crowdsourcing
–outsourcing tasks to a group of people in order to tap into the ideas of the crowd
–Valuable information can be obtained by crowd voting
Recruiting Employees
1. LinkedIn used by large and small companies to recruit employees
2. More than half of Fortune100 companies use LinkedIn
Developing a Social Media Plan
Step 1:Listen to determine opportunities
Step 2: Establish social media objectives
Step 3: Segment and target the social customer
Step 4: Select social media tools
Step 5: Implement and integrate the plan
Measuring and Adapting a Social Media Plan
1. Quantitative social media measurement
Using numerical measurements, such as counting the number of Web site visitors, number of fans and followers, number of leads generated, and the number of new customers

2. Key performance indicators (KPIs)
Measurements that define and measure the progress of an organization toward achieving its objectives

3. Qualitative social media measurement
Primarily uses sentiment analysis technologyto measure mood, attitude, and emotions of people using social media

Defining e-Business
1. e-Business (electronic business)
The organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society’s needs through the facilities available on the Internet

2. Organizing e-Business Resources
–Resources may be more specialized than in a typical business
–Outsourcing — The process of finding outside vendors and suppliers that provide professional help, parts, or materials at a lower cost.)

3. Satisfying Needs Online
–The Internet has created new customer needs
–e-business can satisfy those needs, as well as traditional ones
—->Global access to information and entertainment
—->Virtually unlimited selections of products
—->Opportunities for interaction
—->Individually custom-tailored content

4. Creating e-Business Profit
a. Increasing Sales Revenue

b. Revenue stream-source of revenue flowing into a firm
—-> Sales of merchandise online
—-> Intelligent information systems to suggest purchases to repeat online customers
—-> Increased sales in physical stores because of product information available online
—-> Advertising on web pages
—-> Subscription fees charged for access to online services and content

c. Reducing expenses – Offering online services that reduce transaction costs, provides information, provides customer assistance.
—-> Reduces the costs of dealing with customers
—-> Reduces the need for as many physical store locations

Combining e-Business Resources
1. Human Resources
Website designers, Programmer, Webmasters

2. Material Resources
Computers, Software, High-Speed Internet connection lines

3. Informational Resources
Customer Tracking Systems
Order Fulfillment and tracking systems
Online content-monitoring systems

4. Financial Resources
Investors interested in supporting e-business firms
Electronic payment from customers.

HR + Material Resources + Info Resources + Financial Resources = Business

Fundamental Models of e-Business
Business model – A group of common characteristics and methods of doing business to generate sales revenues and reduce expenses

Business-to-Business (B2B) model – Firms that use the Internet mainly to conduct business with other businesses. Facilitating sales transactions between businesses. Elicit bids and offers from suppliers and potential suppliers; learning about the customer’s rules and procedures. Expensive to start and maintain but savings are significant

Business-to-Consumer (B2C) model –
Firms that focus on conducting business with individual buyers
Success comes from understanding how the customer behaves online to build good customer relationships

Planning for a New Internet Business or Building an Online Presence for an Existing Business
Successful E-Business Planning
1. Starting a new internet business
2. Building an online presence for an existing business.
The Future of Computer Technology, the Internet, and e-Business
1. The Internet and e-business will continue to expand along with related computer technologies

2. Internet Growth Potential
a. Opportunity: 2.3 billion of the world’s nearly 7 billion people in the world use the Web
b. Americans comprise 11 percent of all users
c. Internet growth potential in the U.S. is limited since 77 percent of Americans already use it
d. Projections indicate worldwide users will increase dramatically

3. Ethical and Legal Concerns
a. Essentially the Internet is a new “frontier” without borders and without much control by governments or other organizations
b. Ethics and Social Responsibility – Spamming, Log-file records, Data mining
c. Internet Crime – Malware, Computer virus

4. Future Challenges for Computer Technology and e-Business
a. More information is now available than ever before, its amount will only increase
b. Businesses must consider more than the cost factors in using technology
—Internal, more controllable by management: planning, organization structure, human resources, management decisions, information database, financing
–Green IT: activities to support a healthy environment and sustain the planet
—External: less controllable or not at all: globalization, economy, competition, politics

Internal and External Forces That Affect an e-Business
1. External Forces
a. Globalization
b. Demographic factors
c. Society
d. The Economy
e. Competition
f. Technology
g. Political forces
h. Legal Issues

2. Internal Forces
a. Planning Activities
b. Greet IT
c. Organizational Structure
d. Human Resources
e. Management decisions
f. Information database
g. Available financing

3. Successful e-business

Just under of U.S. adults use some sort of social media.
True or False
False
Engaging customers in generating new ideas for products or services is an unethical use of social media.
True or False
False
The cost to create and distribute photos, videos, and podcasts should be a consideration when a business is trying to decide if it should participate in media sharing.
True or False
True
Angry Birds is a popular blog.
True or False
False
A wiki is an online collaborative working space where people contribute content.
True or False
True
The two types of social media measurement are quantitative and qualitative.
True or False
True
Sources of revenue flowing into the firm are referred to as revenue channels.
True or False
False
Firms that tend to focus on conducting e-business with other businesses are referred to as having a B2B focus.
True or False
True
When General Electric uses the Internet to purchase materials from its suppliers, it is using a B2C business model.
True or False
False
Outsourcing is the process of finding outside vendors and suppliers that provide professional help, parts, or materials at a lower cost.
True or False
True
Social media can most accurately be described as being about

technology.
people.
the Web.
new development.
advertising.

people
Which of the following describes an interactive community bulletin board?

Blogs
Podcasts
Forums
Social games
Crowdsourcing

Forums
What is a podcast?

A multiplayer, competitive activity
An interactive version of a community bulletin board
A collaborative online working space
A digital audio or video file
A website to share information

A digital audio or video file
Which of the following companies was one of the early adopters of consumer ratings?

Facebook
Help.com
MySpace
Amazon
SocialLiving

Amazon
Which of the following is the last step in building a social media plan?

Establish social media objectives
Listen to determine opportunities
Segment and target the social media customer
Select social media tools
Implement and integrate the plan

Implement and integrate the plan
Each objective of a social media plan should be all of the following except

measurable.
specific.
achievable.
oriented toward the future.
vague.

vague
Which of the following is true about social media measurement tools?

Most companies use quantitative measurements.
Companies should use the same measurements for online as for offline business activities.
There are generally five types of social media measurement.
Social media cannot be measured quantitatively.
Most companies use qualitative measurements.

Most companies use quantitative measurements.
A customer tracking system is an example of e-business resources.

human
informational
material
financial
supplemental

informational
What percentage of worldwide Internet users do Americans represent?

4
78
10
15
25

10
Which of the types of resources needed for an e-business is Storybook.com most likely to receive from a venture capitalist?

Software
Human
Financial
Material
Informational

Financial
The manager who is responsible for ensuring that a firm’s equipment is operational is a data technology manager.
a. True
b. False
b. False
The B2B and B2C models are the most popular business models for e-business.
a. True
b. False
True
Reducing expenses is an important way in which e-business can help to increase profitability.
a. True
b. False
True
Spamming is a small piece of software sent by a Web site that tracks an individual’s Internet activity.
a. True
b. False
False
Cookies are files that store a record of visited Web sites.
a. True
b. False
False
A computer virus can actually originate at any location in the world.
a. True
b. False
True
What is the primary reason why telecommuting and virtual offices are a reality in today’s environment?
a. Commute times
b. Cost savings
c. Mobile phones and blackberrys
d. Family responsibilities
e. Technology
Technology
Every Web site on the Internet is identified by its unique
a. LAN.
b. URL.
c. http.
d. WAN.
e. ISP.
URL
Suggestions for developing a company Web site include all of the following except
a. developing a theme.
b. adding graphics.
c. developing plans to update the site.
d. planning the layout of your site.
e. making sure the site is complex.
making sure the site is complex
Approximately ________ percent of the American population are Internet users.
a. 59
b. 89
c. 42
d. 77
e. 35
77
________ is a general term that describes software designed to infiltrate a computer system without the user’s consent.
a. A cookie
b. A computer virus
c. Malware
d. Data mining
e. Internet crime
Malware
You found it very difficult to find a supplier for raw materials on the internet when you were looking for it because no platform connecting buyers and sellers existed. You then decided to open an e-business to help buyers and sellers interact with each other directly. Which of the following e-business models should you use?

a. Subscription and pay-per-view e-business model
b. Advertising e-business model
c. Peer-to-peer (P2P) model
d. Brokerage e-business model

Brokerage e-business model
You are starting up a new e-business. If you hand over human resource management to Joseph, which of the following remote resources would Joseph need to manage?
a. Hi-speed Internet
b. Web site designers
c. Computers
d. Customer tracking systems
Web site designers
Which of the following is an example of an information resource for an e-business?
a. Computers
b. Customer tracking systems
c. Web site designers
d. Hi-speed Internet
Customer tracking systems
Dream Apparel has recently ventured into an e-business. They are looking for options that will help them increase their profitability by reducing their expenses. Which of the following activities will help them achieve the same?
a. Charge subscription fees for accessing online services and content
b. Advertise on Web pages
c. Earn commissions from sellers of products linked to the site
d. Provide online access to information that customers want
Provide online access to information that customers want
Social media refers to the online as well as offline interactions between individuals and businesses.
a. True
b. False
False
Status Interiors regularly posts pictures of home décor items on Pinterest. This is a business move aimed to:
a. Meet the rising demand
b. Make the product more visible
c. Provide after-sales service
d. Address customer complaints
Make the product more visible
Frost Engineering has planned to share its conferences with remote locations. As a result, participants in different countries will be able to carry out real-time point-to-point communications. This would be an example of a __________.
a. Broadcast
b. Chat
c. Webinar
d. Workshop
Webinar
YouTube is an example of _________.
a. Gaming site
b. Media sharing site
c. Blog
d. Podcast site
Media sharing site
Building brand awareness is a long term goal whereas generating sales lead is a short term goal that can be achieved with the help of social media.
a. True
b. False
True
Jenny has been suggested to join a social media community to share her views on different topics with likeminded people. Joining such a community will enable her to create a profile and provide her space to ___________.
a. Gain an academic degree
b. Moderate the members’ views
c. Buy commodities at the lowest prices
d. Connect with others
Tech savvy digital natives born after 1980 are called _____________.
a. Sentinels
b. Socials
c. Millennials
d. Prodigals
Millennials
Buzz Mobile Communications caters to customers of all ages. They have planned to create a marketing plan that will be effective for all age groups. Their marketing plan should include the use of ______________.
a. A combination of social media and traditional media
b. Only social media
c. Specialized media
d. Only traditional media
A combination of social media and traditional media
Companies commonly use KPIs to assess progress in various areas. KPI stands for _______________.
a. Key performance indicators
b. Known and private information
c. Knowledge of primary internship
d. Kaizen productivity index
Key performance indicators
Customer satisfaction score, issue resolution rate, and resolution time are some quantitative social media measurement techniques.
a. True
b. False
False
Jason is the IT manager of a consumer durables manufacturing organization. He has noticed that the advertising campaigns and the customer database of the organization have been accessed by unauthorized users. Unauthorized users must have used _______ to gain access to the information.
a. Spyware
b. Closeware
c. Malware
d. Hardware
Malware
The social and legal concerns for the Internet, social media, and e-business are more because the Internet is an emerging area still not strictly governed by governmental or legal controls.
a.
b. False
True
Jason was apprehended by the police for posing as his colleague Mike and using Mike’s credit card number, without his permission, to commit fraud. He is being tried in the court for ___________.
a. Identity theft
b. Cyberstalking
c. Copyright infringement
d. Cyber bullying
Identity theft
Social Media is about a culture of ________________, which makes it easier to connect, create, discuss, vote for, and advocate an issue.
a. Innovation
b. Sensation
c. Narration
d. Participation
Participation
Zuckerman Spaeder LLP has a blog called “Suits by Suits”, in which it discusses legal disputes between companies and executives. Which of the following business objectives is the firm attempting to achieve through social media?
a. Crisis and reputation management
b. Building a social media community
c. Listening to stakeholders
d. Recruiting employees
Building a social media community
A marketing consultant recommends that since your firm is utilizing social media, you should map out who posts or updates social media sites at what time and how often. These actions would be part of which step of building a social media plan?
a. Establish social media objectives
b. Select social media tools
c. Segment and target the social customer
d. Implement and integrate the plan
Implement and integrate the plan
When Jimbo’s, a locally owned warehouse club store, began developing its own social media campaign, the company was very cognizant of the number one reason why businesses choose to use social media:
a. increase its allure to experienced and hip potential employees.
b. double profits within one year.
c. drastically slash expenses—half within one year.
d. increase exposure for the business.
e. cut expenses.
d. increase exposure for the business.
TJ Corbett is the owner of a sole proprietorship with a current project that is focused on promoting local farms that are hosting families or groups as income for their farms. He is interested in sharing information about the farms, building trust that the experience would be beneficial and a learning venture, and expecting and providing a means of feedback through comments. TJ wants to start a
a. blog.
b. forum.
c. podcast.
d. social game.
e. wiki.
a. blog.
Skirts n Tops, Inc., sells a full line of women’s wear through its Web site, skirtsntops.com, to a wide variety of retail stores, online sites, as well as directly to its consumers. Edmundo manages the company’s Web site and much of the social media community content. Edmundo is currently working closely with June, a Portland State University (PSU) intern, who is developing her skills in blogging and podcasts with a focus on offering company information to the wide array of clients and customers. Rene, another PSU intern, is working closely with Edmundo on improving the company’s social networking presence. Edmundo is leading a team, along with the two PSU interns, that will evaluate the company’s existing Web presence; within one month, the team will present an array of suggested changes. This is great experience for the interns, important managerial skill-building for Edmundo, and an opportunity for the company to grow.

June is committed to convincing Edmundo and the other members of the team of the effectiveness of a blog for Skirts n Tops. She will use all of the following arguments except that blogs
a. help develop better relationships with customers.
b. attract new customers.
c. tell stories about the company’s products.
d. send content directly to potential clients and customers.
e. provide an active forum for testing new ideas.

d. send content directly to potential clients and customers.
Skirts n Tops, Inc., sells a full line of women’s wear through its Web site, skirtsntops.com, to a wide variety of retail stores, online sites, as well as directly to its consumers. Edmundo manages the company’s Web site and much of the social media community content. Edmundo is currently working closely with June, a Portland State University (PSU) intern, who is developing her skills in blogging and podcasts with a focus on offering company information to the wide array of clients and customers. Rene, another PSU intern, is working closely with Edmundo on improving the company’s social networking presence. Edmundo is leading a team, along with the two PSU interns, that will evaluate the company’s existing Web presence; within one month, the team will present an array of suggested changes. This is great experience for the interns, important managerial skill-building for Edmundo, and an opportunity for the company to grow.

Rene learned a lot about KPIs, key performance indicators, in the last year of his classes and thinks that developing some indicators will help measure Skirts n Tops social media plan. Rene knows (and is communicating to the rest of his team) that KPIs are _____ and the first step is to connect KPIs with _____.
a. qualitative; objectives
b. quantitative; a new revenue stream
c. quantitative; objectives
d. qualitative; a revenue stream
e. qualitative; e-business revenue

c. quantitative; objectives
Which of the following most accurately describes e-commerce?
a. Satisfying the needs and wants of the general population.
b. Organized effort to produce and sell, for a profit, the products and services that satisfy society’s needs.
c. A part of e-business that usually refers to buying and selling activities.
d. Fulfilling society’s needs through the Internet.
e. Electronically transforming key business activities.
c. A part of e-business that usually refers to buying and selling activities.
According to Forrester Research, which of the following is not a type of individual that uses social media?
a. Users
b. Critics
c. Joiners
d. Spectators
e. Creators
a. Users
Computer hardware is the physical component of a computer.
a. True
b. False
True
Tiara wishes to go to Egypt for her annual holiday. Which of the following sources should she check out?
a. Ratings and reviews
b. Music videos on Youtube
c. Online games
d. Online Lottery sites
Ratings and reviews
The social game Fire and Smoke created by Vivienne Inc. has gained immense popularity. The company is now looking at business from a related source—the sale of ____________.
a. Branded merchandise
b. Computer accessories
c. Software (not the answer)
d. Mobile phones
The potential growth of the Internet in developed countries is limited as compared to that expected in the developing countries.
a. True
b. False
True
Monitoring conversations on social networking sites helped Noir Technologies detect that people were beginning to harbor negative perception of their brand and they took urgent measures to remedy the situation. This would be an example of
a. Anger management
b. Risk management
c. Asset management
d. Reputation management
d. Reputation management
You are an information technology officer in your organization. You already have the hardware and the system software in place for a new project. Now you need to order the application software. Which of the following will you order?
a. Mac OS X
b. Linux
c. Microsoft Office
d. Microsoft Windows
c. Microsoft Office
As part of its promotional activities, ActiLife Sports Accessories is planning an afforestation drive on the local hill. It would be a good idea for them to build a social media community to generate interest and increase participation.
a. True
b. False
True
Experts expect that the use of telecommuting and virtual offices will increase in the future.
a. True
b. False
True
Bright Spot Bath Fittings uses the number of sales leads generated from their website to measure the success of their social media plan. This would be an example of qualitative social media management.
a. True
b. False
b. False
Which of the following is false about intranets?
a. Intranet sites are protected.
b. Users might need to enter a user name and password to gain access.
c. A company’s policy documents on customer warranties might be stored on an intranet.
d. An intranet includes a series of customized company Web pages.
e. An intranet could be described as a larger version of the Internet.
e. An intranet could be described as a larger version of the Internet.
With the advent of social media, the market has become more ___________.
a. Government-dominated
b. Business-dominated
c. Consumer-dominated
d. Agent-dominated
c. Consumer-dominated
The Internet is an example of a computer network.
a. True
b. False
a. True
While reading information given on a web page on alternative therapies, you accidentally click the hypertext physiological tests. What do you think will happen?
a. It translates the text, physiological tests, in your preferred language
b. It gives you the meaning of the text, physiological tests
c. It connects you to the home page of the web site
d. It links you to other web sites, which are linked to this web page to provide more information
d. It links you to other web sites, which are linked to this web page to provide more information
Sharp Communications has decided to use social media for recruiting new employees. Which of the following will be an outcome of this measure?
a. The company will gain more information about the candidates.
b. The company will get long-term employees.
c. The company will spend more time.
d. The company will incur more recruiting costs.
a. The company will gain more information about the candidates.
Nova Marketing wants to reduce company’s expenses. They are advised to use _______________ computing, a technology that makes services stored on the Internet available on a temporary basis.
a. proxy
b. remote
c. Cloud
d. Internet
c. Cloud
Which of the following is not a social networking site?
a. Twitter
b. LinkedIn
c. Yahoo!
d. Facebook
e. MySpace
c. Yahoo!
Crimson Creations has decided to use technology to detect the moods, attitudes, and emotions that social media users harbor about the company. This exercise would be called
a. Sentiment analysis
b. Opinion analysis
c. Response analysis
d. Feeling analysis
a. Sentiment analysis
________ is the process of finding outside vendors and suppliers that provide professional help, parts, or materials at a lower cost.
a. Business-to-business
b. B2C
c. Business modeling
d. Outsourcing
e. Social networking
d. Outsourcing
Intelligent Spending is a portal that provides advice on investments. They charge a monthly fee to join the portal. Which e-business model is followed by Intelligent Spending to provide investment information through their web site?
a. Advertising e-business model
b. Brokerage e-business model
c. Subscription and pay-per-view e-business model
d. Peer-to-peer (P2P) model
c. Subscription and pay-per-view e-business model
Peer-to-peer software that allows individuals to share information over the Internet is a ________ model.
a. advertising e-business
b. business-to-business
c. subscription e-business
d. advertising e-business
e. peer-to-peer
e. peer-to-peer
In order to segment and target the right customers, Shutterbug Cameras wishes to find out more information about its customers. The answers to which of the following questions is important for them to know?
a. How do they use social media? (Not the answer)
b. How much time do they spend on social media?
c. Do they believe in the future of social media?
d. Do they use social media?
Technical Networks has records of all candidates who have applied for jobs in the past two years. The company needs to identify candidates with a background of sales. Which of the following will help the company find this information from the database?
a. Data interpretation
b. Checking cookies
c. Data sifting
d. Data mining
d. Data mining
Compared to traditional marketing, social media messages are top down.
a. True
b. False
b. False
Root Accessories has decided to develop a social media plan for the first time. What should be the first thing they should look do?
a. Listening to stakeholders
b. Offering freebies to stakeholders
c. Recruiting people
d. Regulating conversations
a. Listening to stakeholders
Just over half of the world’s population are Internet users.
a. True
b. False
b. False
Examine how information can reduce risk when making a decision.
The more information a manager has, the less risk there is that a decision will be incorrect. Information produces knowledge and empowers managers and employees to make better decisions. Because of the volume of information they receive each day and their need to make decisions on a daily basis, business people use information rules to shorten the time spent analyzing choices.

Information rules emerge when business research confirms the same results each time it studies the same or a similar set of circumstances. Although many people use the terms data and information interchangeably, there is a difference.

Data are numerical or verbal descriptions that usually result from some sort of measurement. Information is data presented in a form that is useful for a specific purpose.

A database is a single collection of data and information stored in one place that can be used by people throughout an organization to make decisions. Although databases are important, the way the data and information are used is even more important. As a result, management information experts now use the term knowledge management (KM) to describe a firm’s procedures for generating, using, and sharing the data and information.

Discuss management’s information requirements.
A management information system (MIS) is a means of providing managers with the information they need to perform their jobs as effectively as possible. The purpose of an MIS (sometimes referred to as an information technology system or simply IT system) is to distribute timely and useful information from both internal and external sources to the decision makers who need it. The specific types of information managers need depend on their area of management and level within the firm. The size and complexity of an MIS must be tailored to the information needs of the organization it serves.
Outline the five functions of an information system.
The five functions performed by an MIS system are collecting data, storing data, updating data, processing data into information, and presenting information. Data may be collected from internal sources and external sources. An MIS must be able to store data until they are needed and to update them regularly to ensure that the information presented to managers and employees is accurate, complete, and timely. Data processing is the MIS function that transforms stored data into a form useful for a specific purpose. Finally, the processed data (which now can be called information) must be presented for use. Verbal information generally is presented in the form of a report. Numerical information most often is displayed in graphs, charts, or tables. In addition to the five basic functions performed by an MIS, managers and employees can use a decision-support system (DSS), an executive information system (EIS), expert system, and business application software to make decisions and to report data and information.
Explain why accurate accounting information and audited financial statements are important.
Accounting is the process of systematically collecting, analyzing, and reporting financial information. It can be used to answer questions about what has happened in the past; it also can be used to help make decisions about the future. The purpose of an audit is to make sure that a firm’s financial statements have been prepared in accordance with generally accepted accounting principles. To help ensure that corporate financial information is accurate and in response to the accounting scandals that surfaced in the last few years, the Sarbanes-Oxley Act was signed into law. This law contains a number of provisions designed to restore public confidence in the accounting industry. Although many people think all accountants do the same thing, typical areas of expertise include managerial, financial, cost, tax, government, and not-for-profit. A private accountant is employed by a private firm. A public accountant performs accounting work for various individuals or firms on a fee basis. Most accounting firms include on their staffs at least one CPA.
Read and interpret a balance sheet.
A balance sheet (sometimes referred to as a statement of financial position) is a summary of a firm’s assets, liabilities, and owners’ equity accounts at the end of an accounting period. This statement must demonstrate that the accounting equation is in balance. On the balance sheet, assets are categorized as current, fixed, or intangible. Similarly, liabilities can be divided into current liabilities and long-term liabilities. For a sole proprietorship or partnership, owners’ equity is shown as the difference between assets and liabilities. For corporations, the owners’ equity section reports the values of stock and retained earnings.
Read and interpret an income statement.
An income statement is a summary of a firm’s financial operations during the specified accounting period. On the income statement, the company’s gross profit is computed by subtracting the cost of goods sold from net sales. Operating expenses and interest expense then are deducted to compute net income before taxes. Finally, income taxes are deducted to obtain the firm’s net income after taxes.
Describe business activities that affect a firm’s cash flow.
Since 1987, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) have required all publicly traded companies to include a statement of cash flows in their annual reports. This statement illustrates how the company’s operating, investing, and financing activities affect cash during an accounting period. Together, the cash flow statement, balance sheet, and income statement illustrate the results of past decisions and the business’s ability to pay debts and dividends as well as to finance new growth
Summarize how managers evaluate the financial health of a business.
The firm’s financial statements and its accounting information become more meaningful when compared with information for competitors, for the industry in which the firm operates, and corresponding information for previous years. Such comparisons permit managers, employees, lenders, investors, and other interested people to pick out trends in growth, borrowing, income, and other business variables and to determine whether the firm is on the way to accomplishing its long-term goals. A number of financial ratios can be computed from the information in a firm’s financial statements. These ratios provide a picture of a firm’s profitability, its ability to pay its debts, and how often it sells its inventory. Like the information on the firm’s financial statements, these ratios can and should be compared with information for competitors, for the industry in which the firm operates, and corresponding information for previous years.
GAAPs have been developed to provide guidelines for the majority of international companies.
a. True b. False
b. False
Much of the accounting information of a firm is proprietary, meaning it is not shared with anyone outside the firm.
a. True b. False
b. False
Cost accounting determines the expense of producing specific products and services.
a. True b. False
a. True
Accountants are generally classified as either for-profit or non-profit accountants.
a. True b. False
b. False
Analyzing source documents is a step in the accounting cycle that’s usually performed only at the end of an accounting period.
a. True b. False
b. False
Retained earnings are revenue minus expenses in a business.
a. True b. False
b. False
Net sales are the sales of goods and services after adjustments for permanent and temporary expenses are made.
a. True b. False
b. False
A firm’s operating expenses are all business costs including cost of goods sold.
a. True b. False
b. False
Accounts receivable turnover is the number of times the firm collects its accounts receivable in one year.
a. True b. False
a. True
The current ratio divides current assets by owners’ equity.
a. True b. False
b. False
According to the text, which of the following U.S. companies has been convicted or accused of accounting fraud?
a. Bank of America
b. Costco
c. Lehman Brothers
d. McDonalds
e. Walmart
c. Lehman Brothers
There is pressure on publicly held companies to look good to Wall Street analysts and investors. Companies report their revenues, expenses, profits, and projects
a. quarterly.
b. every month.
c. bi-annually.
d. annually.
e. every six months.
a. quarterly.
Which of the following is not a component of the Sarbanes-Oxley Act?
a. There is added whistle-blower protection.
b. Public corporations must change lead auditing firms every five years.
c. CEOs are liable for intentional violations of securities reporting requirements.
d. It includes clear international audit procedures.
e. Audit work papers must be maintained for five years.
d. It includes clear international audit procedures.
The primary user group that confirms tax liabilities are
a. suppliers.
b. stockholders and potential investors.
c. management.
d. lenders.
e. government agencies.
e. government agencies.
Having adequate cash balances to help a business survive in a down economy is critical. The financial ratio that would be most important to keep track of with this approach would be the:
a. return on sales
b. earnings per share
c. inventory turnover ratio
d. current ratio
d. current ratio
In an economic downturn, management may need to depend on “internally generated cash” to operate the business. Which of the following would be considered a source of internally generated cash?
a. Adjusting component and/or raw material inventory replenishment strategies
b. Selling excess merchandise inventory at a discounted price
c. All of these statements are correct.
d. Collecting outstanding accounts receivable
c. All of these statements are correct.
Last year a furniture store had an average inventory of $40,000, and its cost of goods sold was $200,000. How many times did the store replace its inventory last year?
a. Three times
b. Two times
c. Five times
d. Four times
e. It can’t be determined with this information.
c. Five times
Portland Metro Advertising, Inc., has become a leader at understanding its market and using data and information in ways that are important and valuable to the firm. The management information team describes its process of generating, using, and sharing data and information as
a. knowledge management.
b. dataprocessing.
c. an expert system.
d. an MIS.
e. an executive information system.
a. knowledge management.
Evaluating financial statements permits managers, lenders, suppliers, and investors to do all of the following except
a. identify trends in sales and profits.
b. retain a firm’s earnings.
c. analyze borrowing needs.
d. determine whether the firm is on track with its long-term goals.
e. identify business variables.
a. identify trends in sales and profits.
Nearly a year ago MariElena acquired her first accounting job with an accounting firm after finishing her undergraduate degree in accounting and passing the CPA exam. While consulting with Oakland City Paving, MariElena quickly noticed the lack of accounting understanding not only by employees but also by most of the mid-level managers. Her recent education is a big help to the company and she’s been approached by several of the managers to share some of her knowledge and understanding with other employees. The CEO has encouraged her to start a series of short, semi-formal sessions that share some of her accounting knowledge with others.

MariElena thinks she will start with a brief discussion of her education and experience.
MariElena is a _____ accountant and she has passed the _____ requirements in order to be a CPA.
a. private; state
b. public; state
c. private; federal
d. public; regional
e. public; federal

b. public; state
Nearly a year ago MariElena acquired her first accounting job with an accounting firm after finishing her undergraduate degree in accounting and passing the CPA exam. Whileconsulting withOakland City Paving, MariElena quickly noticed the lack of accounting understanding not only by employees but also by most of the mid-level managers. Her recent education is a big help to the company and she’s been approached by several of the managers to share some of her knowledge and understanding with other employees. The CEO has encouraged her to start a series of short, semi-formal sessions that share some of her accounting knowledge with others.

MariElena thinks a good place to start will be to clarify what the process of ___ entails: collecting, analyzing, and reporting financial information.
a. depreciation
b. journalizing
c. auditing
d. accounting
e. bookkeeping

d. accounting
Taxes payable and salaries payable are examples of
a. stockholders’equity.
b. expenses.
c. long-term liabilities.
d. current liabilities.
e. fixed assets.
d. current liabilities.
The fifth step in the accounting cycle is
a. preparing the financial statements.
b. preparing the trial balance.
c. analyzing source documents.
d. recording the transactions.
e. posting transactions
a. preparing the financial statements.
How important is management and accounting information for a successful business?
It would be extremely difficult to manage even a small business without management and accounting information.
Information
One of the four major resources (along with material, human, and financial resources) managers must have to operate a business.

when understood properly, produces knowledge and empowers managers and employees to make better decisions.

is data presented in a form that is useful for a specific purpose.

Example: Suppose that a HR manager wants to compare the wages paid to male and female EE over a period of five years. The manager might begin with a stack of computer printouts listing every person employed by the firm, along with each employee’s current and past wages. The manager would be hard pressed to make any sense of all the names and numbers. Such printouts consist of data rather than information.

Using relevant information results in better decisions…
Relevant Information =
Better Intelligence and knowledge +
Better Decisions

are especially important because they can provide a competitive edge over competitors and improve a firm’s profits.

An information rule
emerges when research confirms the same results each time that it studies the same or a similar set of circumstances.

emerges when research confirms the same results each time that it studies the same or a similar set of circumstances.

are the “great simplifiers” for all decision makers.

Business research is continuously looking for new rules that can be put to good use and looking to discredit old ones that are no longer valid. This ongoing process is necessary because business conditions rarely stay the same for very long.

Example: Now suppose that the manager uses a computer to graph the average wages paid to men and to women in each of the five years. The result is information because the manager can use it to compare wages paid to men with those paid to women over the five-year period. For a manager, information presented in a practical, useful form, such as a graph, simplifies the decision-making process.

Data
are numerical or verbal descriptions that usually result from some sort of measurement.

A description of an individual as a “tall, athletic person with short, dark hair” certainly would qualify as data.

Example: Suppose that a HR manager wants to compare the wages paid to male and female EE over a period of five years. The manager might begin with a stack of computer printouts listing every person employed by the firm, along with each employee’s current and past wages. The manager would be hard pressed to make any sense of all the names and numbers. Such printouts consist of data rather than information.

Typical data include records pertaining to personnel, inventory, sales, and accounting.

Cisco Systems
is a company known for transforming how people connect, communicate, and collaborate. The technology giant is also a respected innovator that develops state-of-the-art equipment needed by employees, managers, and individuals to manage knowledge and information.
Database
A single collection of data and information stored in one place that can be used by people throughout an organization to make decisions.
Knowledge Management (KM)
A firm’s procedures for generating, using, and sharing the data and information. Typically, data, information, databases, and KM all become important parts of a firm’s management information system.
Describe how information reduces risk when you make a personal or work-related decision
What are information rules? How do they simplify the process of making decisions?
What is the difference between data and information? Give an example each of accounting data and accounting information?
Management’s Information Requirements (MIS)
a system that provides managers and employees with the information they need to perform their jobs as effectively as possible.

The purpose – To distribute timely and useful information from both internal and external sources to the managers and employees who need it

Sometimes referred to as an information technology system or simply IT system

Integrated database capable of receiving, organizing, summarizing, and calculating data and information and providing information to managers networked in the system.

must be tailored to the needs of the organization it serves.

5 Areas of Management (Managers)
1. Finance
2. Operations
3. Marketing
4. Human Resources
5. Administration
5 Areas of Management (Managers/Responsibilities)
Suppose, for example, that General Electric (GE) is designing a new plant in China to manufacture energy-efficient light bulbs that will open in five years. GE’s Ops management will want answers to many questions:

3. Is the capacity of the plant consistent with marketing plans based on sales projections? (Marketing)
4. Will human resources managers be able to recruit U.S. employees with the appropriate skills who are willing to relocate to a foreign country and hire and train Chinese workers to staff the plant? (HR)
1. And do sales projections indicate enough income to cover the expected cost of the plant? (Finance)
5. Next, administrative managers must make sure that all managers and employees are able to use the information technology that is available. (Admin)

Financial Managers
Finances

1. Most concerned with a firm’s finances.
2. Ensure that the firm’s managers and employees, lenders and suppliers, stockholders and potential investors, and government agencies have the information they need to measure the financial health of the firm

Operations Manager
Sales (Present,future), Inventory (in progress,finished), Availability, Cost of Resources

Concerned with present and future sales levels, current inventory levels of work in process and finished goods, and the availability and cost of the resources required to produce products and services.

Marketing Managers
Product details and services by competitors.

Need to have detailed information about a firm’s products and services and those offered by competitors.

Such information includes pricing strategies, new promotional campaigns, and products that competitors are test marketing. Information concerning the firm’s customers, current and projected market share, and new and pending product legislation is also important to marketing managers.

Human Resources Managers
Employees

Must be aware of anything that pertains to a firm’s employees.

Key examples include current wage levels and benefits packages both within the firm and in firms that compete for valuable employees, current legislation and court decisions that affect employment practices, and the firm’s plans for growth, expansion, or mergers.

Administrative Managers
Overall Management

Responsible for the overall management of the organization.

Thus, they are concerned with the coordination of information—just as they are concerned with the coordination of material, human, and financial resources.

Must ensure that the information is used in a consistent manner throughout the firm.

Must commit to the costs of updating the firm’s MIS and providing additional training when necessary.

information overload
the amount of worthless information, junk e-mails, and advertising that contribute to information overload.
Chief Technology Officer
One of the main goals – Ensure that a firm has the equipment necessary to provide information the employees need to make effective decisions—at a reasonable cost.
How do the information requirements of managers differ by management area?
What happens if a business has a management information system that is too large?
Unused capacity and complexity do nothing but increase the cost of owning and operating the system. In addition, a system that is difficult to use probably will not be used at all.
What happens if a business has a management information system that is too small?
In some firms, a tendency to save on initial costs may result in a system that is too small or overly simple. Such a system generally ends up serving only one or two management levels or a single department. Managers in other departments “give up” on the system as soon as they find that it cannot process their data.
How do Employees Use a Management information system?
To provide information, an MIS must perform five specific functions. It must

1. collect data,
2. store the data
3. update the data
4. process the data into information
5. present the information to users

How Much Should Businesses Know About Internet Users?
When you click to conduct an online search or to download a digital coupon, businesses can follow your electronic movements. When you click to conduct an online search or to download a digital coupon, businesses can follow your electronic movements.

Privacy advocates worry about the potential for identity theft and the possibility that data may be shared without consent. They also express concern that businesses might restrict access to some products based on what consumers do or say online.

Businesses point out the benefits of collecting data to personalize website functionality based on each user’s preferences and previous visits. They also look at behavioral data when planning new products and services.

Step 1: Collecting Data
1-A firm’s employees, with the help of an MIS system, must gather the data and information needed to establish the firm’s database.

2-The database should include all past and current data that may be useful in managing the firm. Clearly, the data entered into the system must be relevant to the needs of the firm’s managers.
3-And perhaps most important, the data must be accurate. Irrelevant data are simply useless; inaccurate data can be disastrous.

There are two data sources: internal and external.

2 Types of Data Sources
External
Internal
Internal Sources of Data
most of the data gathered for an MIS.

Are managers and employees, company records and reports, accounting data, and minutes of meetings.

External Sources of Data
Are customers, suppliers, financial institutions and banks, trade and business publications, industry conferences, online computer services, lawyers, government sources, and firms that specialize in gathering marketing research for organizations.
Internal/External Cautions
1. The cost of obtaining data from some external sources, such as marketing research firms, can be quite high.
2. Outdated or incomplete data usually yield inaccurate information.
3. Although computers generally do not make mistakes, the people who use them can make or cause errors. When data (or information) and your judgment disagree, always check the data.
Step 2: Storing Data
the method chosen to store data depends on the size and needs of the organization.

Small businesses may enter data and then store them directly on an employee’s computer.

medium-sized to large businesses store data in a larger computer system and provide access to employees through a computer network.

Step 3: Updating Data
an MIS must be able to update stored data regularly to ensure that the information presented to managers and employees is accurate, complete, and up-to-date.

The frequency with which the data are updated depends on how fast they change and how often they are used. When it is vital to have current data, updating may occur as soon as the new data are available. (Macy’s)

Data and information may also be entered into a firm’s data bank at certain intervals—every 24 hours, weekly, or monthly.

Step 4: Processing Data
Some data are used in the form in which they are stored, whereas other data require processing to extract, highlight, or summarize the information they contain.

Data Processing – is the transformation of data into a form that is useful for a specific purpose.

Data Processing
transformation of data into a form that is useful for a specific purpose.
verbal data
this processing consists mainly of extracting the pertinent material from storage and combining it into a report.

Most business data, however, are in the form of numbers—large groups of numbers, such as daily sales totals or production costs for a specific product.

statistic
a measure that summarizes a particular characteristic of an entire group of numbers.
Step 5: Presenting Information
An MIS must be capable of presenting information in a usable form

Method of presentation—reports, tables, graphs, or charts

Business Reports
Verbal information may be presented in list or paragraph form. Employees often are asked to prepare formal business reports. A typical business report includes

1. An introduction – Sets the stage for the remainder of the report, describes the problem to be studied in the report, identifies the research techniques that were used, and previews the material that will be presented in the report

2. The body of the report – Objectively describe the facts that were discovered in the process of completing the report. Provides a foundation for the conclusions and the recommendations.

3. The conclusions – Atatements of fact that describe the findings contained in the report. Conclusions should be specific, practical, and based on the evidence in the report.

4. The recommendations – Suggestions on how the problem might be solved. Specific, practical, and based on the evidence.

Who are the people who use information?
Although the primary users of information are a firm’s managers and employees, parties outside the organization—lenders, suppliers, stockholders, and government agencies—are also interested in the firm’s information. In fact, both managers and employees and outside groups often examine a firm’s annual report to determine the financial health of a firm.
three different software applications to improve/speed the decision-making process for people at different levels within an organization
Decision-support system (DSS)
Executive information system (EIS)
Expert System
Decision-support system (DSS)
type of software program that provides relevant data and information to help a firm’s employees make decisions. It also can be used to determine the effect of changing different variables and answer “what if” type questions.

Example: A manager at Michigan-based Pulte Homes may use a DSS to determine prices for new homes built in an upscale, luxury subdivision. By entering the number of homes that will be built along with different costs associated with land, labor, materials, building permits, promotional costs, and all other costs, a DSS can help to determine a base price for each new home. It is also possible to increase or decrease the building costs and determine new home prices for each set of assumptions with a DSS.

Executive information system (EIS)
Computer-based system that facilitates and supports the decision-making needs of top managers and senior executives by providing easy access to both internal and external information.
Expert System
type of computer program that uses artificial intelligence to imitate a human’s ability to think.

uses a set of rules that analyze information supplied by the user about a particular activity or problem.

Based on the information supplied, provides recommendations or suggests specific actions in order to help make decisions.

Example: Have been used to schedule manufacturing tasks, diagnose illnesses, determine credit limits for credit card customers, evaluate loan applications, and develop electronic games.

2 Integration Benefits
Once data have been entered into an application in an integrated package, the data can be used in another integrated package without having to reenter the data.

Once a user learns one application, it is much easier to learn another application in an integrated package. (Microsoft Office)

integrated software
combines many functions in a single package.

Integrated packages allow for the easy linking of text, numerical data, graphs, photographs, and even audiovisual clips.

Example: A business report prepared using the Microsoft Office package, for instance, can include all these components.

List the five functions of an MIS.
What are the components of a typical business report?
What types of information could be illustrated in a visual display? In a tabular display?
Describe the three types of computer applications that help employees, managers, and executives make smart decisions
Current Business Application Software Used to Improve Productivity
1. Word Processing
2. Desktop Publishing
3. Accounting
4. Database Management
5. Graphics
6. Spreadsheets
Current Business Application Software Used to Improve Productivity
Users can prepare and edit written documents and store them in the computer or on a memory device.
Desktop publishing
Users can combine text and graphics in professional reports, newsletters, and pamphlets.
Accounting
Users can record routine financial transactions and prepare financial reports at the end of the accounting period.
Database management
Users can electronically store large amounts of data and transform the data into information.
Graphics
Users can display and print pictures, drawings, charts, and diagrams.
Spreadsheets
Users can organize numerical data into a grid of rows and columns
Why Accounting Information Is Important
Executives, managers, and employees also rely on the firm’s accounting system to provide needed financial information

To improve the accuracy of a firm’s accounting information and its financial statements, businesses rely on audits conducted by accountants employed by public accounting firms.

Accounting
the process of systematically collecting, analyzing, and reporting financial information.

accounting information can be used to answer questions about what has happened in the past, it can also be used to help make decisions about the future

Common FAQ’s for Firm Accountants
1-How much profit did a business earn last year?
2-How much tax does a business owe the Internal Revenue Service?
3-How much cash does a business have to pay lenders and suppliers?
Why Audited Financial Statements Are Important?
Audit
An examination of a company’s financial statements and the accounting practices that produced them.

The purpose of an audit is to make sure that a firm’s financial statements have been prepared in accordance with generally accepted accounting principles (GAAPs)

Although an audit and the resulting report do not guarantee that a company has not “cooked” the books, it does imply that, on the whole, the company has followed GAAPs.

Bankers, creditors, investors, and government agencies are willing to rely on an auditor’s opinion because of the historically ethical reputation and independence of auditors and accounting firms.

Without the audit function and GAAPs, there would be very little oversight or supervision. The validity of a firm’s financial statements and its accounting records would drop quickly, and firms would find it difficult to obtain debt financing, acquire goods and services from suppliers, find investor financing, or prepare documents requested by government agencies.

generally accepted accounting principles (GAAPs)
have been developed to provide an accepted set of guidelines and practices for U.S. companies reporting financial information and the accounting profession.
Financial Accounting Standards Board (FASB)
Establishes and improves accounting standards for U.S. companies
international Financial Reporting Standards (IFRS)
Created by the International Accounting Standards Board

now used in more than 100 different countries around the world

For multinational firms like Royal Dutch Shell, ExxonMobil, Walmart, and Toyota, the benefits of global accounting standards are huge because preparing financial statements and accounting records that meet global standards saves both time and money. According to many accounting experts, the United States is on a path toward the adoption of IFRS, the question is when

If an accountant determines that a firm’s financial statements present financial information fairly and conform to GAAPs, then he or she will issue the following statement:
In our opinion, the financial statements … present fairly, in all material respects the financial position of the company … in conformity with generally accepted accounting principles.
Does this executive trust the numbers?
A firm’s managers and employees must have accurate accounting information to make decisions and plan for the future. Other groups including investors, lenders, and suppliers also must “trust” accounting information to determine the financial health of a company. In fact, without accurate accounting information, the numbers are just that numbers.
Which of the following firms has been convicted or accused of accounting fraud?
1-Lehman Brothers (Banking in the United States)
2-Sino-Forest (Forestry Operations in China)
3-Fannie Mae (Home Mortgages in United States)
4-Autonomy Software (Software Development in Britain)
5-All of the above.

The accounting problems at these companies—and similar problems at even more companies—have forced many investors, lenders and suppliers, and government regulators to question the motives behind fraudulent and unethical accounting practices.

Today, much of the pressure on corporate executives to “cook” the books is driven by the desire to look good to Wall Street analysts and investors.
If a company reports sales and profit figures that are lower than expected, the company’s stock value can drop dramatically.

Greed—especially when executive salaries and bonuses are tied to a company’s stock value—is another factor that can lead some corporate executives to use unethical accounting methods to inflate a firm’s sales revenues and profit amount.

Victims – the ones that hurt when companies (and their accountants) report inaccurate or misleading accounting information often are not the high-paid corporate executives.

It’s the employees who lose their jobs when the company files for bankruptcy, as well as the money they invested in the company’s retirement program.

Investors, lenders, and suppliers who relied on fraudulent accounting information in order to make a decision to invest in or lend money to the company also usually experience a loss.

Sarbanes-Oxley Act in 2002
Congress enacted to help ensure that corporate financial information is accurate and to prevent the type of accounting scandals that have occurred in the past

Complex rules make compliance more expensive and time-consuming for corporate management and more difficult for accounting firms. Yet, most people agree that the cost of compliance is justified.

Sarbanes-Oxley Act (SOX) Key Components
1. The Securities and Exchange Commission (SEC) is required to establish a full-time five-member federal oversight board that will police the accounting industry.

2. Chief executive and financial officers are required to certify periodic financial reports and are liable for intentional violations of securities reporting requirements.
3. Accounting firms are prohibited from providing many types of non-audit and consulting services to the companies they audit.
4. Auditors must maintain financial documents and audit work papers for five years.
5. Auditors, accountants, and employees can be imprisoned for up to 20 years and subject to fines for destroying financial documents and willful violations of the securities laws.
6. A public corporation must change its lead auditing firm every five years.
7. There is added protection for whistle-blowers who report violations of the Sarbanes-Oxley Act.

Different Types of Accounting
1. Managerial Accounting
2. Financial Accounting
3. Cost Accounting
4. Tax Accounting
5. Government Accounting
6. Not-for-Profit Accounting
Managerial Accounting
provides managers and employees within the organization with the information needed to make decisions about a firm’s financing, investing, marketing, and operating activities.

Both managers and employees can evaluate how well they have done in the past and what they can expect in the future

Financial Accounting
generates financial statements and reports for interested people outside of an organization.

stockholders, financial analysts, bankers, lenders, suppliers, government agencies, and other interested groups use the information provided by financial accounting to determine how well a business firm has achieved its goals.

Cost Accounting
determining the cost of producing specific products or services
Tax Accounting
planning tax strategy and preparing tax returns for firms or individuals
Government Accounting
providing basic accounting services to ensure that tax revenues are collected and used to meet the goals of state, local, and federal agencies
Not-for-Profit Accounting
helping not-for-profit organizations to account for all donations and expenditures
Careers in Accounting
Private Accountant
Public Accountant
Certified Public Accountant (CPA)
Accountants
1-Inspect a firm’s accounting systems to ensure the business is using generally accepted accounting procedures.
2-Examine financial statements to be sure that they are accurate.
3-Calculate the amount of taxes owed, prepare tax returns, and ensure that taxes are paid properly and on time.
4-Organize and maintain financial records.
Assist employees, managers, and owners to improve financial decisions.
5-Suggest ways to reduce costs, enhance revenues, and improve profits.

Accountants, as well as auditors in the accounting area, are expected to experience a 16% increase or about average employment growth between now and the year 2020.

Often higher than the starting salaries for other entry-level positions.

generally are classified as either private accountants or public accountants

private accountant
employed by a specific organization
public accountant
works on a fee basis for clients and may be self-employed or be the employee of an accounting firm.
Largest Accounting Firms (aka “Big Four”)
1. PricewaterhouseCoopers (PwC)
2. Ernst & Young
3. KPMG
4. Deloitte Touche Tohmatsu
Certified public accountant (CPA)
an individual who has met state requirements for accounting education and experience and has passed a rigorous accounting examination

Public accounting firms typically include on their staffs at least one

State requirements usually include a college degree or a specified number of hours of college course work and generally from one to three years of on-the-job experience.

Certification as a CPA brings both status and responsibility.

Publicly traded corporations, for example, must hire an independent CPA to audit their financial statements. Fees for the services provided by CPAs generally range from $50 to $100/hr.

American Institute of CPAs (AICPA)
More information about general requirements and the CPA profession
What purpose do audits and GAAPs serve in today’s business world?
How do the major provisions of the Sarbanes-Oxley Act affect a public company’s audit procedures?
The Accounting Equation and the Balance Sheet
Financial Data
Financial Data –> Financial Information = Reporting

financial data is transformed into financial information and reported on three very important financial statements—the balance sheet, income statement, and statement of cash flows.

3 Important Financial Statements
1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows
The Accounting Equation
simple statement that forms the basis for the accounting process.

This equation shows the relationship between a firm’s assets, liabilities, and owners’ equity.

Assets = Liabilities + Owners Equity

To use this equation, a firm’s accountants must record raw data—that is, the firm’s day-to-day financial transactions—using the double-entry system of bookkeeping

Assets
the resources a business owns—cash, inventory, equipment, and real estate

The dollar total of all of a firm’s assets cannot equal more than the total funds obtained by borrowing money (liabilities) and the investment of the owner(s).
Doesn’t matter the size of the business.

Before determining the total value of a firm’s assets, accountants must determine the value of each type of inventory a firm has on hand to meet customer demand. Accurate accounting procedures for inventory can also determine when it is time to order more inventory.

Liabilities
the firm’s debts—borrowed money it owes to others that must be repaid
Owners’ equity
The difference between total assets and total liabilities— what would be left for the owners if the firm’s assets were sold and the money used to pay off its liabilities
double-entry bookkeeping system
System in which each financial transaction is recorded as two separate accounting entries to maintain the balance shown in the accounting equation.

End of a specific accounting period, all of the financial transactions can now be summarized in the firm’s financial statements.

This information is presented in a standardized format to make the statements as accessible as possible to the various people who may be interested in the firm’s financial affairs—managers, employees, lenders, suppliers, stockholders, potential investors, and government agencies.

Financial Statements
Pretty much the same for all businesses

Prepared at least once a year and included in the firm’s annual report

Most firms prepare semiannually, quarterly, or monthly

Annual Report
Report distributed to stockholders and other interested parties that describes a firm’s operating activities and its financial condition.
The Balance Sheet (or Statement of Financial Position)
a summary of the dollar amounts of a firm’s assets, liabilities, and owners’ equity accounts at the end of a specific accounting period

Reports dollar values for assets, liabilities, and owners’ equity

must demonstrate that assets are equal to liabilities plus owners’ equity, and the accounting equation is still in balance

as a statement that reports the financial condition of a business firm (Hershey Foods Corp) and individuals.

On a balance sheet, assets are listed in order from the most liquid to the least liquid.

Where could you find the total amount of assets, liabilities, and owners’ equity for Hershey Foods Corporation?
The firm’s balance sheet.
Personal Balance Sheet
individuals determine their net worth, or owners’ equity, by subtracting the value of their liabilities from the value of their assets.
Liquidity
of an asset is the ease with which it can be converted into cash.
Current Assets
assets that can be converted quickly into cash or that will be used in one year or less.
marketable securities
stocks, bonds, and other investments

can be converted into cash in a matter of days.

Types of Current Assets
1. Cash (most liquid asset)
2. Marketable Securities
3. Firm’s Receiveables
4. Merchandise Inventory
5. Prepaid Expenses
Accounts Receivables
which result from allowing customers to make credit purchases, generally are paid within 30 to 60 days.
However, the firm expects that some of these debts will not be collected. Thus, it has reduced its accounts receivables by a 5% allowance for doubtful accounts.
Notes receivable
are receivables for which customers have signed promissory notes. They generally are repaid over a longer period of time than the firm’s accounts receivable.
merchandise inventory
represents the value of goods on hand for sale to customers
Prepaid Expenses
are assets that have been paid for in advance but have not yet been used.

Example – Insurance Premiums.
Usually paid at the beginning of the policy year. The unused portion (say, for the last four months of the time period covered by the policy) is a prepaid expense.

Fixed Assets
Assets that will be held or used for a period longer than one year.

Generally include land, buildings, and equipment used in the continuing operation of the business.

Depreciation
is the process of apportioning the cost of a fixed asset over the period during which it will be used, that is, its useful life.

The depreciation amount allotted to each year is an expense for that year, and the value of the asset must be reduced by the amount of depreciation expense.

Intangible Assets
are assets that do not exist physically but that have a value based on the rights or privileges they confer on a firm.

Include patents, copyrights, trademarks, and goodwill.

By their nature, are long-term assets—they are of value to the firm for a number of years.

Liabilities and Owners’ Equity
The liabilities and the owners’ equity accounts complete the balance sheet.

The firm’s liabilities are separated into two categories—current and long-term liabilities.

Firm Liabilities Categories
Current Liabilities
Long-Term Liabilities
Current Liabilities
are debts that will be repaid in one year or less.

Example: Northeast Art Supply purchased merchandise from its suppliers on credit. Thus, its balance sheet includes an entry for accounts payable.

Accounts payable
are short-term obligations that arise as a result of a firm making credit purchases
Notes Payable
obligations that have been secured with promissory notes.

They are usually short-term obligations, but they may extend beyond one year.

Only those that must be paid within the year are listed under current liabilities.

Salaries payable and taxes payable
Listed as current liabilities – These are both expenses that have been incurred during the current accounting period but will be paid in the next accounting period.
Long-Term Liabilities
are debts that need not be repaid for at least one year.
Owners’ or Stockholders’ Equity
For a sole proprietorship or partnership, the owners’ equity is shown as the difference between assets and liabilities.

In a partnership, each partner’s share of the ownership is reported separately in each owner’s name.

For a corporation, the owners’ equity usually is referred to as stockholders’ equity.

The dollar amount reported on the balance sheet is the total value of stock plus retained earnings that have accumulated to date.

Owners Equity = Total Value Stock + Retained Earnings (YTD)

Retained earnings
are the portion of a business’s profits not distributed to stockholders.
Smart Career Moves –
Before you accept a company’s job offer or buy its stock
Check financials and its business situation. Are profits increasing or decreasing? How is it handling its debt? What are its plans for expansion?
How are current assets distinguished from fixed assets?
Why are fixed assets depreciated on a firm’s balance sheet?
How do you determine the dollar amount of owners’ equity for a sole proprietorship, or a partnership, or a corporation?
If a business firm has assets worth $170k and liabilities that total $40k, what is the value of the owners’ equity?
Income Statement
a summary of a firm’s revenues and expenses during a specified accounting period—one month, three months, six months, or a year.

Reports the firm’s dollar amount of profit or loss

Sometimes called the earnings statement or the statement of income and expenses.

Difference between income and expenses:
Profit/Loss for a business
cash surplus/cash deficit for an individual.

Where can you find the profit or loss amount for Apple, Inc.?
The firm’s income statement
Personal Income Statement
By subtracting expenses from income, anyone can construct a personal income statement and determine if he or she has a surplus or deficit at the end of each month.

Income – Expenses = Personal Income Statement

personal budget
a specific plan for spending your income—over the next month
Business Income Statement
Revenue – Cost of Goods – Operating Expenses
= Net Income

Summarizes a firm’s revenues and expenses during a specified accounting period

Revenues
are the dollar amounts earned by a firm from selling goods, providing services, or performing business activities.

obtains from the sale of its products or services. The revenues section of its income statement begins with gross sales.

Gross sales
are the total dollar amount of all goods and services sold during the accounting period.

Deductions made from this amount:
1. Sales Returns
2. Sales Allowances
3. Sales Discounts

The remainder is the firms net sales

Sales Returns
merchandise returned to the firm by its customers
sales allowances
price reductions offered to customers who accept slightly damaged or soiled merchandise
sales discounts
price reductions offered to customers who pay their bills promptly
Net Sales
are the actual dollar amounts received by the firm for the goods and services it has sold after adjustment for returns, allowances, and discounts.

Total Amt Sold – Deductions = Net Sales

Cost of Goods Sold
The standard method of determining by a retailing or a wholesaling firm:

Cost of goods sold = Beginning inventory + Net Purchases – Ending Inventory

Gross Profit
is its net Sales less the cost of goods sold.

Gross Profit = Net Sales – Cost of Goods Sold

Operating Expenses
are all business costs other than the cost of goods sold
2 Operating Expenses Categories
Selling Expenses
General Expenses
Net Income
The difference when revenues exceed expenses.
Net Loss
The difference when expenses exceed revenues.
net income from operations
Net Income from Ops =
Gross Profit – Total Operating Expense
Net Income Before Taxes
Net Income Before Taxes =
Net Income from Ops – Interest Expense
Net Income After Taxes
This amount may be used to pay a dividend to stockholders, it may be retained or reinvested in the firm, it may be used to reduce the firm’s debts, or all three.
What is the difference between a balance sheet and an income statement?
Explain how a retailing firm would determine the cost of goods sold during an accounting period.
If a retailer has revenues of $700k, cost of goods sold that total $270k, and operating expenses that total $200k, what is its net income before taxes?
Statement of Cash Flows
illustrates how the company’s operating, investing, and financing activities affect cash during an accounting period.

focuses on how much cash is on hand to pay the firm’s bills

Executives and managers can also use the information to determine how much cash is available to pay dividends to stockholders.

the information can be used to evaluate decisions related to a firm’s future investments and financing needs

Investors want to know if a firm can pay dividends. Before extending credit to a firm, lenders and suppliers often use the information on the statement of cash flows to evaluate the firm’s ability to repay its debts.

In 1987, what did the SEC and FASB require from all publicly traded companies to include in their annual report?
The SEC and the FASB required all publicly traded companies to include a statement of cash flows, along with their balance sheet and income statement, in their annual report.
3 Activities in the Statement of Cash Flows
1. Cash Flows from Operating Activities
2. Cash Flows from Investing Activities
3. Cash Flows from Financing Activities

The totals of all three activities are added to the beginning cash balance to determine the ending cash balance.

Cash Flows from Operating Activities
This is the first section of a statement of cash flows.

It addresses the firm’s primary revenue source—providing goods and services.

Typical adjustments include adding the amount of depreciation to a firm’s net income.

Other adjustments for increase or decrease in amounts for accounts receivable, inventory, accounts payable, and income taxes payable are also required to reflect a true picture of cash flows from operating activities.

Cash flows from investing activities
The second section of the statement is concerned with cash flow from investments.

This includes the purchase and sale of land, equipment, and other assets and investments.

Cash flows from financing activities
The third and final section deals with the cash flow from all financing activities.

It reports changes in debt obligation and owners’ equity accounts. This includes loans and repayments, the sale and repurchase of the company’s own stock, and cash dividends

3 Financial Statements
1. Statement of Cash Flows
2. Balance Sheet
3. Income Statement

illustrate the results of past business decisions and reflect the firm’s ability to pay debts and dividends and to finance new growth.

can provide answers to a variety of questions about a firm’s ability to do business and stay in business, its profitability, and its value as an investment

What is the purpose of the statement of cash flows?
In a statement of cash flows, what is included in the operating activities section? In the investing activities section? In the financial activities section?
Evaluating Financial Statements
To evaluate a firm’s financial health, often the first step is to compare a firm’s financial data with other firms in similar industries and with its own financial results over recent accounting periods.

Evaluating financial statements is serious business.

Even after a firm’s financial statements are prepared, accountants often dig deeper and prepare audits to make sure that accounting information is accurate. They also calculate financial ratios to measure a firm’s profitability, its ability to pay its debts, and how well it manages inventory.

Comparing Financial Data
Many firms compare their financial results with those of competing firms, with industry averages, and with their own financial results.

Most corporations include in their annual reports comparisons of the important elements of their financial statements for recent years.

Comparisons are possible as long as accountants follow GAAPs.

Comparisons among firms give executives, managers, and employees a general idea of a firm’s relative effectiveness and its standing within the industry.

Competitors’ financial statements can be obtained from their annual reports—if they are public corporations. Industry averages are published by reporting services such as D&B (formerly Dun & Bradstreet) and Hoover’s, Inc., as well as by some industry trade associations.

Most corporations include in their annual reports comparisons of the important elements of their financial statements for recent years:
1. Revenue
2. Research & Development (R&D)
3. Operating Income
4. Sales & Marketing Expenses

Financial Ratios
a number that shows the relationship between two elements of a firm’s financial statements

these ratios can be compared with those of competitors, with industry averages, and with the firm’s past ratios from previous accounting periods.

The information required to form these ratios is found in a firm’s balance sheet, income statement, and statement of cash flows

Financial Ratios
Measuring a Firm’s Ability to Earn Profits
Measuring a Firm’s Ability to Pay its Debts
Measuring How Well a Firm Manages Its Inventory
Return on owners’ equity
Earnings per share
Working capital
Debt-to-equity

Based on the information contained in a firm’s balance sheet, income statement, and statement of cash flows.

Measuring a Firm’s Ability to Earn Profits
Sec 15-8b
Measuring a Firm’s Ability to Pay its Debts
Sec 15-8b
Measuring How Well a Firm Manages Its Inventory
Sec 15-8b
What are the benefits of comparing a firm’s current financial information with information for previous accounting periods, with industry averages, and with financial information for competitors?
Explain the calculation procedures for and significance of each of the following:
a. Return on sales.
b. The current ratio.
c. Inventory turnover.
return on sales (or profit margin)
a financial ratio calculated by dividing net income after taxes by net sales
current ratio
a financial ratio computed by dividing current assets by current liabilities
inventory turnover
a financial ratio calculated by dividing the cost of goods sold in one year by the average value of the inventory
The more information a manager has, the less risk there is that a decision will be incorrect
True or False
True
A single collection of data stored in one place is called a data center.
True or False
False
Information is defined as numerical or verbal descriptions that usually result from sort of measurement.
True or False
False
In a business report, the conclusions present suggestions on how the problem might be solved.
True or False
False
An expert system uses artificial intelligence to imitate a human’s ability to think.
True or False
True
There is added protection for whistle-blowers who report violations of the Sarbanes-Oxley Act.
True or False
True
A private accountant is an accountant whose services may be hired on a fee basis by individuals or business firms.
True or False
False
The accounting equation is assets + liabilities = owners’ equity.
True or False
False
Marketable securities can be converted into cash in a matter of days.
True or False
True
Stockholders’ equity represents the total value of a corporation’s stock plus retained earnings that have accumulated to date.
True or False
True
Which statement is not true about a balance sheet?
a-It provides proof that Assets = Liabilities + Owners’ equity.
b- It lists the current, fixed, and intangible assets.
c- It summarizes the firm’s revenues and expenses during one accounting period.
d-It gives the liabilities of the firm.
e-It shows the owners’ equity in the business.
c- It summarizes the firm’s revenues and expenses during one accounting period.
The board of directors decided to pay 50% of the firm’s $460,000 earnings in dividends to the stockholders. The firm has retained earnings of $680,000 on the books. After the dividends are paid, which of the following statements is true about the firm’s retained earnings account?

a-The new value of the firm’s retained earnings is $910,000.
b-The new value of the firm’s retained earnings is $450,000.
c-The firm failed to reach its profit goal.
d-Each shareholder will receive more than he or she received last year.
e-The firm’s retained earnings are too high.

a-The new value of the firm’s retained earnings is $910,000
A firm had gross profits from sales in the amount of , operating expenses of , and federal incomes taxes of . What was the firm’s net income after taxes?
a-$10,000
b-$20,000
c-$70,000
d-$90,000
e-$200,000
Understand why financial management is important in today’s uncertain economy.
Financial management consists of all activities concerned with obtaining money and using it effectively. Financial management can be viewed as a two-sided problem. On one side, the uses of funds often dictate the type or types of financing needed by a business. On the other side, the activities a business can undertake are determined by the types of financing available. Financial managers must ensure that funds are available when needed, that they are obtained at the lowest possible cost, and that they are used as efficiently as possible. In the wake of the economic crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. And today, there is an ongoing debate if more regulations are needed. Still, there are a number of rewarding jobs in finance for qualified job applicants.
Identify a firm’s short- and long-term financial needs.
Short-term financing is money that will be used for one year or less.

There are many short-term needs, but cash flow, speculative production, and inventory are three for which financing is often required.

Long-term financing is money that will be used for more than one year.

Such financing may be required for a business start-up, for a merger or an acquisition, for new product development, for long-term marketing activities, for replacement of equipment, or for expansion of facilities.

According to financial experts, business firms will find it more difficult to raise both short- and long-term financing in the future because of increased regulations and more cautious lenders.

Financial managers must also consider the risk-return ratio when making financial decisions. The risk-return ratio is based on the principle that a high-risk decision should generate higher financial returns for a business.

More conservative decisions generate lesser returns.

Summarize the process of planning for financial management.
A financial plan begins with an organization’s goals and objectives. Next, a firm’s goals and objectives are “translated” into departmental budgets that detail expected income and expenses. From these budgets, which may be combined into an overall cash budget, the financial manager determines what funding will be needed and where it may be obtained. Whereas departmental and cash budgets emphasize short-term financing needs, a capital budget can be used to estimate a firm’s expenditures for major assets and its long-term financing needs. The four principal sources of financing are sales revenues, equity capital, debt capital, and proceeds from the sale of assets. Once the needed funds have been obtained, the financial manager is responsible for monitoring and evaluating the firm’s financial activities.
Identify the services provided by banks and financial institutions for their business customers.
Banks and other financial institutions offer today’s business customers a tempting array of services. Among the most important and attractive banking services are savings accounts and certificates of deposit, checking accounts, short- and long-term loans, and credit-card and debit-card processing. Increased use of electronic funds transfer systems (automated teller machines, automated clearinghouse systems, point-of-sale terminals, and electronic check conversion) also will change the way that business firms bank and conduct typical business transactions. For firms in the global marketplace, a bank can provide letters of credit and banker’s acceptances that will reduce the risk of nonpayment for sellers. Banks and financial institutions also can provide currency exchange to reduce payment problems for import or export transactions
Describe the advantages and disadvantages of different methods of short-term debt financing.
Most short-term financing is unsecured; that is, no collateral is required. Sources of unsecured short-term financing include trade credit, promissory notes issued to suppliers, unsecured bank loans, and commercial paper. Sources of secured short-term financing include loans secured by inventory and accounts receivable. A firm may also sell its receivables to factors. Trade credit is the least-expensive source of short-term financing. The cost of financing through other sources generally depends on the source and on the credit rating of the firm that requires the financing. Factoring is generally the most expensive approach.
Evaluate the advantages and disadvantages of equity financing.
The first time a corporation sells stock to the general public is referred to as an initial public offering (IPO). With an IPO, the stock is sold in the primary market. Once sold in the primary market, investors buy and sell stock in the secondary market. Usually, secondary market transactions are completed through a securities exchange or the over-the-counter market. Common stock is voting stock; holders of common stock elect the corporation’s directors and often must approve changes to the corporate charter. Holders of preferred stock must be paid dividends before holders of common stock are paid any dividends. Another source of equity funding is retained earnings, which is the portion of a business’s profits not distributed to stockholders. Venture capital—money invested in small (and sometimes struggling) firms that have the potential to become very successful—is yet another source of equity funding. Finally, a private placement can be used to sell stocks and other corporate securities
Evaluate the advantages and disadvantages of long-term debt financing.
For a small business, debt financing is generally limited to loans. Large corporations have the additional option of issuing corporate bonds. Regardless of whether the business is small or large, it can take advantage of financial leverage. Financial leverage is the use of borrowed funds to increase the return on owners’ equity. The rate of interest for long-term loans usually depends on the financial status of the borrower, the reason for borrowing, and the kind of collateral pledged to back up the loan. Long-term business loans are normally repaid in 3 to 7 years but can be as long as 15 to 20 years. Money realized from the sale of corporate bonds must be repaid when the bonds mature. In addition, the corporation must pay interest on that money from the time the bonds are sold until maturity. The interest rate the corporation must pay often depends on the financial health of the firm issuing bonds. Maturity dates for bonds generally range from 10 to 30 years after the date of issue. Three types of bonds—debentures, mortgage bonds, and convertible bonds—are sold to raise debt capital. When comparing the cost of long-term financing, the ongoing costs of using stock (equity) to finance a business are low. The most expensive is a long-term loan (debt).
Cash flow can be defined as the amount of accounts payable and accounts receivable of a firm.
a. True
b. False
b. False
Financial experts believe that it will be easier for business firms to raise capital in the future.
a. True
b. False
a. True
One important aspect of a goal is that is must be reasonable and realistic.
a. True v
b. False
a. True
A budget projects future expenditures, it does not project income.
a. True
b. False
b. False
A cash budget always estimates cash receipts and cash expenditures over a one-year period.
a. True
b. False
b. False
For a sole proprietorship, equity capital comes from the sale of shares of ownership in the company.
a. True
b. False
b. False
Profits not distributed to stockholder is called financial leverage.
a. True
b. False
b. False
A trustee is an individual or independent firm that acts as the stock owners’ representative.
a. True
b. False
b. False
The maturity of a bond is the date when the corporation is to repay the borrowed money.
a. True
b. False
a. True
Which of the following is NOT a type of bond:
a. debenture bond
b. mortgage bond
c. convertible bond
d. bond indenture
d. bond indenture
The three ways a corporation can gain by issuing convertible bonds include all but which one of the following:
a. If the bondholder convers to common stock, the corporation no longer has to redeem the bond at maturity.
b. Convertibles usually carry a lower interest rate than conconvertible bonds.
c. The conversion feature attracts investors who are interested in the speculative gain that conversion to common stock may provide.
d. Convertible bonds stimulate the economy.
d. Convertible bonds stimulate the economy.
The risk-return ratio is based on the principle that:
a. high-risk decisions should generate higher financial returns.
b. low risk decisions should generate higher financial returns.
c. risky decisions result in risky financial planning.
d. high risk decisions should generate lower financial returns.
e. a risk is only as good as the economic forecasting available.
a. high-risk decisions should generate higher financial returns.
To ensure that sufficient funds are available when needed in order to redeem bonds, the firm can issue bonds that mature on different dates. Which type of bonds would be the best to issue?
a. Debenture
b. Serial
c. Corporate
d. Registered
e. Convertible
b. Serial
MexAmerica Tile sells a wide array of Mexican- and Southwest-style tiles for home and office projects. MexAmerica has long been committed to the regional university and the business internship program. The company has just brought its sixth intern on staff for a six-month period—often hiring the intern after the internship is completed. TJ Corea is the new intern. He’s devoted to understanding more about the financing of MexAmerica. The plan is to gradually ease TJ into the finances of the organization. If all goes as planned, near the end of the six months, TJ will be considering a long-term career with MexAmerica and MexAmerica will be considering extending him an offer.

MexAmerica uses ___ for the purpose of redeeming bond issues.
a. financial leverage
b. retained earnings
c. a par value
d. a sinking fund
e. a private placement

d. a sinking fund
MexAmerica Tile sells a wide array of Mexican- and Southwest-style tiles for home and office projects. MexAmerica has long been committed to the regional university and the business internship program. The company has just brought its sixth intern on staff for a six-month period—often hiring the intern after the internship is completed. TJ Corea is the new intern. He’s devoted to understanding more about the financing of MexAmerica. The plan is to gradually ease TJ into the finances of the organization. If all goes as planned, near the end of the six months, TJ will be considering a long-term career with MexAmerica and MexAmerica will be considering extending him an offer.

TJ knows that if he were to accept a career position with MexAmerica, his employers would have expectations that he would be able to recommend short-term loan solutions as needed. TJ can anticipate that they might needshort-term financing for
a. cash flow problems.
b. new product development.
c. mergers and acquisitions.
d. replacement of equipment.
e. expansion of facilities.

a. cash flow problems.
Equity capital is obtained from
a. banks.
b. stockholders.
c. insurance companies.
d. bondholders.
e. credit unions.
b. stockholders.
The interest rates and repayment terms for term loans are based on which factor?
a. All of these factors are considered.
b. Available working capital
c. Reasons for borrowing
d. Value of the collateral
e. Borrowing firm’s credit rating
a. All of these factors are considered.
The steps in effective financial planning are, in order,
a. establishing objectives, budgeting, and identifying sources of funds.
b. establishing goals, setting objectives, and working the plan.
c. developing plans, monitoring plans, and evaluating the results.
d. establishing objectives, identifying sources, and budgeting.
e. identifying financial resources, budgeting, and establishing goals.
a. establishing objectives, budgeting, and identifying sources of funds.
banker’s acceptance
a written order for a bank to pay a third party a stated amount of money on a specific state
bond indenture
a legal document that details all the conditions relating to a bond issue
budget
a financial statement that projects income, expenditures, or both over a specified future period
capital budget
a financial statement that estimates a firm’s expenditures for major assets and its long-term financing needs
cash budget
a financial statement that estimates cash receipts and cash expenditures over a specified period
cash flow
the movement of money into and out of an organization
certificate of deposit (CD)
A document stating that the bank will pay the depositor a guaranteed interest rate on money left on deposit for a specified period of time
check
a written order for a bank or other financial institution to pay a stated dollar amount to the business or person indicated on the face of the check
chief financial officer (CFO)
a high-level corporate executive who manages a firm’s finances and reports directly to the company’s chief executive officer or president
collateral
real estate or property pledged as security for a loan
commercial paper
a short-term promissory note issued by a large corporation.
common stock
stock whose owners may vote on corporate matters but whose claims on profits and assets are subordinate to the claims of others
convertible bond
a bond that can be exchanged, at the owner’s option, for a specified number of shares of the corporation’s common stock
corporate bond
a corporation’s written pledge that it will repay a specified amount of money with interest
debenture bond
a bond backed only by the reputation of the issuing corporation
debit card
a card that electronically subtracts the amount of a customer’s purchase from her or his bank account at the moment the purchase is made
debt capital
borrowed money obtained through loans of various types
electronic funds transfer (EFT) system
a means of performing financial transactions through a computer terminal or telephone hookup
equity capital
money received from the owners or from the sale of shares of ownership in a business
factor
a firm that specializes in buying other firms’ accounts receivable
financial leverage
the use of borrowed funds to increase the return on owners’ equity
financial management
all the activities concerned with obtaining money and using it effectively
financial plan
a plan for obtaining and using the money needed to implement an organization’s goals and objectives
initial public offering (IPO)
occurs when a corporation sells common stock to the general public for the first time
investment banking firm
an organization that assists corporations in raising funds, usually by helping to sell new issues of stocks, bonds, or other financial securities
letter of credit
a legal document issued by a bank or other financial institution guaranteeing to pay a seller a stated amount for a specified period of time.
line of credit
a loan that is approved before the money is actually needed
long-term financing
money that will be used for longer than one year
maturity date
the date on which a corporation is to repay borrowed money
mortgage bond
a corporate bond secured by various assets of the issuing firm
over-the-counter (OTC) market
a network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange
preferred stock
stock whose owners usually do not have voting rights but whose claims on dividends and assets are paid before those of common-stock owners
primary market
a market in which an investor purchases financial securities (via an investment bank) directly from the issuer of those securities
prime interest rate
the lowest rate charged by a bank for a short-term loan
private placement
occurs when stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors
promissory note
a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date
registered bond
a bond registered in the owner’s name by the issuing company
retained earnings
the portion of a corporation’s profits not distributed to stockholders
revolving credit agreement
a guaranteed line of credit
risk-return ratio
a ratio based on the principle that a high-risk decision should generate higher financial returns for a business and more conservative decisions often generate lower returns
secondary market
a market for existing financial securities that are traded between investors
securities exchange
a marketplace where member brokers meet to buy and sell securities
serial bonds
bonds of a single issue that mature on different dates
short-term financing
money that will be used for one year or less
sinking fund
a sum of money to which deposits are made each year for the purpose of redeeming a bond issue
speculative production
the time lag between the actual production of goods and when the goods are sold
term-loan agreement
a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments
trade credit
a type of short-term financing extended by a seller who does not require immediate payment after delivery of merchandise
trustee
an individual or an independent firm that acts as a bond owner’s representative
unsecured financing
financing that is not backed by collateral; unsecured short-term financing offers several options
zero-base budgeting
a budgeting approach in which every expense in every budget must be justified
A budget is a historical record of the previous year’s financial activities.
False
When you use a debit card to make a purchase, a financial institution is extending credit to you and expects to be paid in the future.
False
With a banker’s acceptance, certain conditions, such as delivery of the merchandise, may be specified before payment is made.
False
Most lenders do not require collateral for short-term financing.
True
A revolving credit agreement is a guaranteed line of credit.
True
Factoring of accounts receivable typically is the highest cost method of short-term financing.
True
Normally, the usual repayment period for a long-term loan is three to seven years.
True
The usual face value for most corporate bonds is .
False
A capital budget estimates a firm’s expenditures for labor costs and other monthly expenses.
False
A written order for a bank or other financial institution to pay a stated dollar amount to a specified business or person is called a

check.
deposit slip.
notes receivable.
receipt.
debit memorandum.

check.
Judy Martinez, owner of Judy’s Fashions, received a 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 interest. Her account is a

line of credit.
certificate of deposit.
checking account.
commercial paper agreement.
savings account.

certificate of deposit.
An invoice in the amount of $200 carries cash terms of “2/10, net 30.” If the buyer takes advantage of the discount terms, how much will the buyer pay?

$100
$120
$140
$160
$196

$196
When a firm sells its accounts receivable to raise short-term cash, it is engaging in a strategy called

factoring.
financial planning.
equity financing
debt financing.
drafting.

factoring
Retained earnings, as a form of equity financing, are

gross earnings.
profits before taxes.
profits after taxes.
undistributed profits.
total owners’ equity.

undistributed profits.
Since prices are extremely low, the Pipeline Supply Company wants to purchase a special line of pipes from a company going out of business. Pipeline, however, will need to borrow money to make this deal. Which assets will Pipeline most commonly pledge as collateral for this short-term loan?

delivery equipment
notes payable
manufacturing equipment
owners’ equity
inventory

inventory
The most basic form of corporate ownership that has voting rights is

preferred stock.
common stock.
retained stock.
deferred value stock.
treasury stock.

common stock.
A short-term promissory note issued by large corporations is known as

debenture agreement.
equity agreement.
commercial paper.
draft agreement.
loan commitment.

commercial paper.
Each of the following causes a cash flow problem except

embezzlement of company funds.
an unexpected slow selling season.
a large number of credit sales.
slow-paying customers.
customers who pay on time.

customers who pay on time.
The primary sources of funds available to a business include all of the following except

debt capital.
equity capital.
sales revenue.
government grants.
sale of assets.

government grants.
Identify the various distribution channels and explain the concept of market coverage.
A marketing channel is a sequence of marketing organizations that directs a product from producer to ultimate user. The marketing channel for a particular product is concerned with the transfer of ownership of that product. Merchant middlemen (merchants) actually take title to products, whereas functional middlemen simply aid in the transfer of title.

The channels used for consumer products include the direct channel from producer to consumer, the channel from producer to retailer to consumer, the channel from producer to wholesaler to retailer to consumer, and the channel from producer to agent to wholesaler to retailer to consumer. There are two major channels of industrial products: producer to user and producer to agent middleman to user.

Channels and intermediaries are chosen to implement a given level of market coverage. Intensive distribution is the use of all available outlets for a product, providing the widest market coverage. Selective distribution uses a portion of the available outlets in an area. Exclusive distribution uses only a single retail outlet for a product in a large geographic area.

Understand how supply-chain management facilitates partnering among channel members.
Supply-chain management is a long-term partnership among channel members working together to create a distribution system that reduces inefficiencies, costs, and redundancies, while creating a competitive advantage and satisfying customers. Cooperation is required among all channel members, including manufacturing, research, sales, advertising, and shipping. When all channel partners work together, delivery, scheduling, packaging, and other customer requirements are better met. Technology makes supply-chain management easier to implement.
Discuss the need for wholesalers, describe the services they provide, and identify the major types of wholesalers.
Wholesalers are intermediaries that purchase from producers or other intermediaries and sell to industrial users, retailers, or other wholesalers. Wholesalers perform many functions in a distribution channel. If they are eliminated, other channel members—such as the producer or retailers—must perform these functions. Wholesalers provide retailers with assistance in promoting products, collecting information and financing. They provide manufacturers with sales assistance, reduce their inventory costs, furnish market information, and extend credit to retailers.

Merchant wholesalers buy and then sell products. Commission merchants and brokers are essentially agents and do not take title to the goods they distribute. Sales branches and offices are owned by the manufacturers and resemble merchant wholesalers and agents, respectively.

Distinguish among the major types of retailers and shopping centers.
Retailers are intermediaries that buy from producers or wholesalers and sell to consumers. In-store retailers include department stores, discount stores, warehouse showrooms, convenience stores, supermarkets, superstores, warehouse clubs, traditional specialty stores, off-price retailers, and category killers. Non store retailers use direct selling, direct marketing, and automatic vending, instead of conventional stores. Types of direct marketing include catalog marketing, direct-response marketing, telemarketing, television home shopping, and online retailing.

There are four major types of shopping centers: lifestyle, neighborhood, community, and regional. Each of these centers has a varying mix of stores and serves geographic areas of different sizes.

Explain the five most important physical distribution activities.
Physical distribution consists of activities designed to move products from producers to ultimate users. Its five major functions are inventory management, order processing, warehousing, materials handling, and transportation. These interrelated functions are integrated into marketing efforts.
Explain how integrated marketing communications works to have the maximum impact on the customer.
Integrated marketing communications is the coordination of promotion efforts to achieve maximum informational and persuasive impact on customers.
Understand the basic elements of the promotion mix.
Promotion is communication about an organization and its products that is intended to inform, persuade, or remind target market members.

The major ingredients of a promotion mix are advertising, personal selling, sales promotion, and public relations.

The role of promotion is to facilitate exchanges directly or indirectly and to help an organization maintain favorable relationship with groups in the marketing environment.

Explain the three types of advertising and describe the major steps of developing an advertising campaign.
Advertising is a paid non-personal message communicated to a specific audience through a mass medium. Primary-demand advertising promotes the products of an entire industry rather than just a single brand. Selective-demand advertising promotes a particular brand of product. Institutional advertising is image-building advertising for a firm.

An advertising campaign is developed in several stages. A firm first identifies and analyzes its advertising target. The goals of the campaign must be clearly defined. Then the firm develops the advertising platform and determines the size of advertising budget. The next steps are to develop a media plan, to create the advertising message, and to execute the campaign. Finally, promotion managers must evaluate the effectiveness of the advertising efforts before, during, and/or after the campaign.

Recognize the kinds of salespersons, the steps in the personal selling process, and the major sales management tasks.
Personal selling is personal communication aimed at informing customers and persuading them to buy a firm’s products. It is the most adaptable promotional method because the salesperson can modify the message to fit individual buyers. The major types are order getters, order takers, and support personnel. The six steps in the personal-selling process are prospecting, approaching the prospect, making the presentation, answering objections, closing the sale, and following up. Sales managers are involved directly in setting sales force objectives, recruiting, selecting, and training salespersons, compensating and motivating sales personnel, creating sales territories, and evaluating sales performance.
Describe sales promotion objectives and methods.
Sales promotion is the use of activities and materials as direct inducements to customers and salespersons. Sales promotions enhance and supplement other promotional methods. Methods of sales promotion include rebates, coupons, samples, premiums, frequent-user incentives, point-of-purchase displays, trade shows, buying allowances, and cooperative advertising.
Understand the types and uses of public relations.
Public relations is a broad set of communication activities used to create and maintain favorable relationships between an organization and various public groups, both internal and external. Organizations use a variety of public relations tools to convey messages and create images. Brochures, newsletters, company magazines and annual reports are written public-relations tools. Speeches, event sponsorship, and publicity are other public-relations tools. Publicity is communication in news-story form about an organization, its products, or both. Types of publicity include news releases, feature articles, captioned photographs, and press conferences. Public relations can also be used to promote people, places, activities, and ideas. It can be used to enhance the reputation of an organization and reduce the unfavorable effects of negative events.
advertising
a paid nonpersonal message communicated to a select audience through a mass medium
advertising agency
an independent firm that plans, produces, and places advertising for its clients
agent
a middleman that expedites exchanges, represents a buyer or a seller, and often is hired permanently on a commission basis
automatic vending
the use of machines to dispense products
broker
a middleman that specializes in a particular commodity, represents either a buyer or a seller, and is likely to be hired on a temporary basis
buying allowance
a temporary price reduction to re-sellers for purchasing specified quantities of a product
captioned photograph
a picture accompanied by a brief explanation
carrier
a firm that offers transportation services
Catalog Marketing
a type of marketing in which an organization provides a catalog from which customers make selections and place orders by mail, telephone, or the Internet
catalog killer
a very large specialty store that concentrates on a single product line and competes on the basis of low prices and product availability
Chain Retailer
a company that operates more than one retail outlet
Community Shopping Center
a planned shopping center that includes one or two department stores and some specialty stores, along with convenience stores
Consumer Sales Promotion Method
a sales promotion method designed to attract consumers to particular retail stores and to motivate them to purchase certain new or established products
Convenience Store
a small food store that sells a limited variety of products but remains open well beyond normal business hours
Cooperative Advertising
an arrangement whereby a manufacturer agrees to pay a certain amount of a retailer’s media cost for advertising the manufacturer’s products
coupon
reduces the retail price of a particular item by a stated amount at the time of purchase
Creative Selling
selling products to new customers and increasing sales to present customers
Department Store
a retail store that
— employs 25 or more persons and
— sells at least home furnishings, appliances, family apparel, and household linens and dry goods, each in a different part of the store
Direct Marketing
the use of the telephone, Internet, and non-personal media to introduce products to customers, who then can purchase them via mail, telephone, or the Internet
Direct Selling
the marketing of products to customers through face-to-face sales presentations at home or in the workplace
Direct Response Marketing
a type of marketing in which a retailer advertises a product and makes it available through mail, telephone, or online orders
Discount Store
a self-service general-merchandise outlet that sells products at lower-than-usual prices
Distribution Channel (or Marketing Channel)
a sequence of marketing organizations that directs a product from the producer to the ultimate user
Exclusive distribution
the use of only a single retail outlet for a product in a large geographic area
Feature Article
a piece (of up to 3,000 words) prepared by an organization for inclusion in a particular publication
Frequent-User Incentive
a program developed to reward customers who engage in repeat (frequent) purchases
Full-Service Wholesaler
a middleman that performs the entire range of wholesaler functions
Functional Middleman
a middleman that helps in the transfer of ownership of products but does not take title to the products
General -Merchandise Wholesaler
a middleman that deals in a wide variety of products
Independent Retailer
a firm that operates only one retail outlet
Institutional Advertising
advertising designed to enhance a firm’s image or reputation
Integrated Marketing Communications
coordination of promotion efforts to ensure maximal informational and persuasive impact on customers
Intensive Distribution
the use of all available outlets for a product
inventory management
the process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stock-out costs
lifestyle shopping center
an open-air-environment shopping center with upscale chain specialty stores
limited-line wholesaler
a middleman that stocks only a few product lines but carries numerous product items within each line
materials handling
the actual physical handling of goods, in warehouses as well as during transportation
merchant middleman
a middleman that actually takes title to products by buying them
merchant wholesaler
a middleman that purchases goods in large quantities and sells them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial users
middleman (or marketing intermediary)
a marketing organization that links a producer and user within a marketing channel

1. Merchant middleman—takes title to products by buying them
2. Functional middleman—helps in the transfer of ownership of
products but does not take title to the products
3. Retailer—buys from producers or other middlemen and sells
to consumers
4. Wholesaler middleman—sells products to other firms

missionary salesperson
a salesperson?generally employed by a manufacturer?who visits retailers to persuade them to buy the manufacturer’s products
neighborhood shopping center
a planned shopping center consisting of several small convenience and specialty stores
news release
a typed page of about 300 words provide by an organization to the media as a form of publicity
non-store retailing
a type of retailing whereby consumers purchase products without visiting a store
off-price retailer
a store that buys manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts
online retailing
retailing that makes products available to buyers through computer connections
order getter
a salesperson who is responsible for selling a firm’s products to new customers and increasing sales to present customers
order processing
activities involved in receiving and filling customers’ purchase orders
order taker
a salesperson who handles repeat sales in ways that maintain positive relationships with customers
personal selling
personal communication aimed at informing customers and persuading them to buy a firm’s products
physical distribution
all those activities concerned with the efficient movement of products from the producer to the ultimate user
point-of-purchase display
promotional material placed within a retail store
premium
a gift that a producer offers a customer in return for buying its product
press conference
a meeting at which invited media personnel hear important news announcements and receive supplementary textual materials and photographs.
primary-demand advertising
advertising whose purpose is to increase the demand for all brands of a product within a specific industry
promotion
communication about an organization and its products that is intended to inform, persuade, or remind target-market members
promotion mix
the particular combination of promotion methods a firm uses to reach a target market
public relations
communication activities used to create and maintain favorable relationships between an organization and various public groups, both internal and external.

Customers, employees, stockholders, suppliers, educators, the media, government officials, society in general.

publicity
communication in news-story form about an organization, its products, or both
rebate
a return of part of the purchase price of a product
regional shopping center
a planned shopping center containing large department stores, numerous specialty stores, restaurants, movie theaters, and sometimes even hotels
retailer
a middleman that buys from producers or other middlemen and sells to consumers
sales promotion
the use of activities or materials as direct inducements to customers or salespersons
sales support personnel
employees who aid in selling but are more involved in locating prospects, educating customers, building goodwill for the firm, and providing follow-up service
sample
a free product given to customers to encourage trial and purchase
selective distribution
the use of only a portion of the available outlets for a product in each geographic area
selective-demand (or brand) advertising
advertising that is used to sell a particular brand of product
specialty-line wholesaler
a middleman that carries a select group of products within a single line
supermarket
a large self-service store that sells primarily food and household products
superstore
a large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product lines
supply-chain management
long-term partnership among channel members working together to create a distribution system that reduces inefficiencies, costs, and redundancies while creating a competitive advantage and satisfying customers
technical salesperson
a salesperson who assists a company’s current customers in technical matters
telemarketing
the performance of marketing-related activities by telephone
television home shopping
a form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card
trade sales promotion method
a sales promotion method designed to encourage wholesalers and retailers to stock and actively promote a manufacturer’s product
trade salesperson
a salesperson?generally employed by a food producer or processor?who assists customers in promoting products, especially in retail stores
trade show
an industry-wide exhibit at which many sellers display their products
traditional specialty store
a store that carries a narrow product mix with deep product lines
transportation
the shipment of products to customers
warehouse club
a large-scale members-only establishment that combines features of cash-and-carry wholesaling with discount retailing
warehouse showroom
a retail facility in a large, low-cost building with a large on-premises inventory and minimal service
warehousing
the set of activities involved in receiving and storing goods and preparing them for reshipment
wholesaler
a middleman that sells products to other firms
Channels of Distribution
Channel of Distribution (Marketing Channel)
Middleman (Marketing Intermediary)
Channels of Consumer Products
1-Producer to Consumer (Direct Channel)
2-Producer to Retailer to Consumer
3-Producer to Wholesaler to Retailer to Consumer
4-Producer to Agent to Wholesaler to Retailer to Consumer
5-A manufacturer may use multiple channels
Channels of Consumer Products-
Producer to Consumer (Direct Channel)
No intermediaries

Used by all services and by a few consumer goods
Producers can control quality and price, do not have to pay for intermediaries, and can be close to their customers

Examples: Dell Computer, Mary Kay Cosmetics

Channels of Consumer Products-
Producer to Retailer to Consumer
Producers sell directly to retailers when retailers (Walmart) can buy in large quantities

Most often used for bulky products for which additional handling would increase selling costs, and for perishable or high-fashion products that must reach consumers quickly

Channels of Consumer Products-
Producer to Wholesaler to Retailer to Consumer
The traditional channel
Used when a producer’s products are carried by so many retailers that the producer cannot deal with them all
Channels of Consumer Products-
Producer to Agent to Wholesaler to Retailer to Consumer
Agent—functional middlemen that do not take title to products and are compensated by commissions paid to the producers

Often used for inexpensive, frequently purchased items, for seasonal products, and by producers that do not have their own sales forces

Channels of Consumer Products-
A manufacturer may use multiple channels
To reach different market segments
When the same product is sold to consumers and businesses

To increase sales or capture a larger market share

Channels for Business Products
1. Producer to Organizational Buyer
2. Producer to Agent Middleman to Org. Buyer
Channels for Business Products –
Producer to Organizational Buyer
Usually used for heavy machinery, airplanes, major equipment

Allows the producer to provide expert and timely services to customers

Channels for Business Products –
Producer to Agent Middleman to Org. Buyer
Usually used for operating supplies, accessory equipment, small tools, standardized parts.
Levels (Intensity) of Market Coverage
Intensive Distribution – The use of all available outlets for a product to saturate the market.

Selective Distribution – The use of only a portion of the available outlets for a product in each geographic area.

Exclusive Distribution – The use of only a single retail outlet for a product in a larger geographic area.

Partnering Through Supply: Chain Management
1. Supply Chain Management – Long-Term partnership among channel members working together to create a distribution system that reduces inefficiencies, costs, and redundancies while creating a competitive advantage and satisfying customers.

2. Category Management – The retailer asks a supplier how to stock the shelves

3. Technology – Has enhanced implementation of supply-chain management.

Marketing Intermediaries: Wholesalers
Justification for Marketing Intermediaries
1. Intermediaries perform essential marketing services

2. Manufacturers would be burdened with additional record keeping and maintaining contact with numerous retailers

3. Costs for distribution would not decrease and could possibly increase due to the marketing inefficiencies of producers

Wholesalers’ Services to Retailers
1. Buy in large quantities and then sell in smaller quantities
2. Deliver goods
3. Stock a variety of goods in one place
4. Promote products to retailers
5. Provide market information for both producers and retailers
6. Provide financial aid in the form of inventory management, loans, delayed billing
Wholesalers’ Services to Manufacturers
1. Provide instant sales forces to manufacturers
2. Reduce manufacturers’ inventory costs by purchasing finished goods in sizable quantities
3. Assume the credit risks associated with selling to retailers
4. Furnish market information gleaned from the market and customers to the manufacturers
Types of Wholesalers
1. Merchant Wholesalers
2. Agents and Brokers
Types of Wholesalers –
Merchant Wholesalers
MIddlemen that purchase goods in large quantities and then sell them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial users

Operate in one or more warehouses where they receive, take title to, and store goods

These wholesalers are sometimes called distributors or jobbers

Full-service wholesalers
-General merchandise wholesaler
-Limited-line wholesaler
-Specialty-line wholesaler

Limited-service wholesalers

Types of Wholesalers –
Agents and Brokers
Agents – Expedites exchanges, represents a buyer or a seller, and is often hired permanently on a commission basis

Broker – Specializes in a particular commodity, represents a buyer or a seller, and is likely to be hired on a temporary basis

Marketing Intermediaries: RETAILERS
The final link between producers and consumers
Over $1M retail firms in the U.S.
Classes of In-Store Retailers
Independent Retailer
Chain Retailer
Department Store
Discount Store
Warehouse Showroom
Convenience Store
Supermarket
Superstore
Warehouse Club
Traditional Specialty Store
Off-Price Retailer
Category Killer
Kinds of Non-Store Retailing
Direct Selling
Direct Marketing
Catalog Marketing
Direct-Response Marketing
Telemarketing
Television Home Shopping
Online Retailing
Automatic Vending
Planned Shopping Centers
Lifestyle Shopping Center
Neighborhood Shopping Center
Community Shopping Center
Regional Shopping Center
Physical Distribution
Inventory Management
Order Processing
Warehousing
Materials Handling
Transportation
Physical Distribution – Inventory Management
The process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stock-out costs

1. Holding costs—the costs of storing products until they are purchased or shipped to customers
2. Stock-out costs—the costs of sales lost when items are not in inventory when needed

Technology and software help manage inventory

Efficiency is crucial for firms using just-in-time (JIT) approach

Physical Distribution – Warehousing
The set of activities involved in receiving and storing goods and preparing them for reshipment
–Receiving goods
–Identifying goods
–Sorting goods
–Dispatching goods to storage
–Holding goods
–Recalling, picking, and assembling goods
–Dispatching shipments

Types of Warehouses:
–Private warehouses—owned and operated by a firm
–Public warehouses—offer their services to all firms

Physical Distribution – Transportation
The shipment of products to customers
1. Carrier—a firm that offers transportation services
—>Common carriers—services available for hire to all shippers
—>Contract carriers—available for hire by one or several shippers; not available to the general public
—>Private carriers—owned and operated by the shipper

2. Freight forwarders—agents who facilitate the transportation process for shippers by handling the details of the process

3. Railroads—in terms of total freight carried, these are America’s most important mode of transportation

Physical Distribution – Transportation (Types)
1. Railroads
-Least expensive mode for many products
-Used for commodities that could not be transported by any other way

2. Trucks
-Tremendous expansion since creation of national highways
-Often favored by offering door-to-door service, less stringent packaging requirements than other services, flexible schedules

3. Airplanes
-Fastest but most expensive
-Used to ship high-value or perishable goods

4. Waterways
-Slowest but least expensive
-Used mainly for bulky, nonperishable goods
-Use limited to cities located on navigable waterways

5. Pipelines
-used primarily to carry petroleum and natural gas

What is Integrated Marketing Communications?
Coordination of promotion efforts to ensure maximal informational and persuasive impact on customers.

Results in a consistent message to customers, long-term customer relationships, and the efficient use of promotional resources

1. Mass media advertising has given way to targeted promotional tools (e.g., cable TV, direct mail, and the Internet)

2. The overall cost of marketing communications has risen significantly, pressuring managers to make the most efficient use of marketing resources

The Promotion Mix: An Overview
The particular combination of promotion methods a firm uses to reach a target market.

1. Advertising – A non-personal message communicated to a select audience through a mass medium

2. Personal Selling – Personal communication aimed at informing customers and persuading them to buy a firm’s products

3. Sales Promotion – The use of activities or materials as direct inducements to customers or salespersons

4. Public Relations – Communication activities used to create and maintain favorable relations between an organization and various public groups, both internal and external

Types of Advertising by Purpose
Primary-Demand Advertising – Used to increase demand for all brands of a product in a specific industry

Selective-Demand Advertising – Used to sell a particular brand of product

Institutional Advertising – Designed to enhance a firm’s image or build its reputation

Major Steps in Developing an Advertising Campaign
1.Identify and analyze the target audience
2.Define the advertising objectives
3.Create the advertising platform
4.Determine the advertising appropriation
5.Develop the media plan
6.Create the advertising message
7.Execute the campaign
8.Evaluate advertising effectiveness
Advertising Agencies
1-Independent firms that plan, produce, and place advertising for their clients
2-Large agencies also help with sales promotion and public relations
3-Media usually pay a commission to agencies
4- Firms may use both in-house advertising departments and an independent agency
Social & Legal Considerations in Advertising
1- Evidence shows that advertising is not wasteful:
2- Most effective and least expensive way to communicate to a large audience
3- Encourages competition
4- Revenues support mass-communication media
5- Provides job opportunities in a wide range of fields
6- FTC, FDA, and FCC oversee advertising practices
Personal Selling
1. The most adaptable promotion method

2. The most expensive promotion method

3. Kinds of salespersons
3a. Order getter – Responsible for creative selling: selling a firm’s products to new customers and increasing sales to current customers

3b. Order taker – Handles repeat sales in ways that maintain positive relationships with customers

4. Sales Support Personnel – Employees who aid in selling but are more involved in locating prospects, educating customers, building goodwill for the firm, and providing follow-up service

4a. Missionary salespersons – Visit retailers to persuade them to buy the manufacturer’s products

4b. Trade salespersons -Assist customers in promoting products, especially in retail stores

4c. Technical salespersons – Assist current customers in technical matters

6 Steps of the Personal-Selling Process
1. Prospecting
2. Approaching the Prospect
3. Making the Presentation
4. Answering Objections
5. Closing the Sale
6. Following Up
Managing Personal Selling
1. Setting sales objectives
—Concrete, quantifiable terms
—Specified time period
—Specified geographic area

2. Adjusting the size of the sales force to meet changes in the firm’s marketing plan and the marketing environment

3. Attracting and hiring effective salespersons

4. Training salespersons

5. Compensating salespersons

6. Motivating salespersons

Sales Promotion
Activities or materials that are direct inducements to customers or salespersons
Sales Promotion Objectives
1. To attract new customers
2. To encourage trial of a new product
3. To invigorate the sales of a mature brand
4. To boost sales to current customers
5. To reinforce advertising
6. To increase traffic in retail stores
7. To steady irregular sales patterns
8. To build up reseller inventories
9. To neutralize competitive promotional efforts
10. To improve shelf space and displays
Sales Promotion Methods
Consumer Sales Promotion Method
Trade Sales Promotion Method
Rebate
Coupon
Sample
Premium
Frequent-User Incentives
Point of Purchase Displays
Trade Shows
Buying Allowance
Cooperative Advertising
Factors Influencing the choice of Sales Promotion Method
1. Objectives of the sales promotional effort
2. Product characteristics
3. Target market profile
4. Distribution channels
5. Availability of resellers
6. Competitive and regulatory forces in the environment
Types of Public Relation Tools
1. Written and Spoken Communications – Brochures, newsletters, company magazines, annual reports, news releases, corporate-identity materials, speeches

2. Event Sponsorship – Special events such as concerts and charity functions that the firm underwrites wholly or partially

3. Publicity – Communication in news-story form about an organization, its products, or both.
Examples: News Release, feature articles, captioned photograph, and press conference.

Uses of Public Relations
1. To promote people, places, activities, ideas
2. To enhance the reputation of the organization by increasing awareness of company products and activities
3. To create specific positive company images
What are the most common marketing channels for consumer products? For industrial products?
What are the three levels of market coverage? What types of products is each used for?
List the services performed by wholesalers. For whom is each service performed?
Identify three kinds of full-service wholesalers. What factors are used to classify wholesalers into one of these categories?
What can nonstore retailers offer their customers that in-store retailers cannot?
What is physical distribution? Which major functions does it include?
Many producers sell to consumers both directly and through middlemen. How can such a producer justify competing with its own middlemen?
In what situations might a producer use agents or commission merchants rather than its own sales offices or branches?
If a middleman is eliminated from a marketing channel, under what conditions will costs decrease? Under what conditions will costs increase? Will the middleman’s functions be eliminated? Explain.
What is integrated marketing communications, and why is it becoming increasingly accepted?
Identify and describe the major ingredients of a promotion mix.
Identify and give examples of the three major types of salespersons.
What are the major tasks involved in managing a sales force?
What are the major differences between consumer and trade sales promotion methods? Give examples of each.
What is the difference between publicity and public relations? What is the purpose of each?
Why do firms use event sponsorship?
A direct channel of distribution includes both wholesalers and retailers.
True or False
False
A retailer buys and sells merchandise.
True or False
True
Exclusive distribution makes use of all available outlets for a product. True or False
False
Inventory holding costs are the costs of storing products until they are purchased or shipped to customers. True or False
True
Piggyback service is unique to air freight.
True or False
False
Institutional advertising promotes specific brands of products. True or False
False
Advertising can be broadly classified into three groups: selective demand, institutional, and primary demand.
True or False
True
A major disadvantage of magazines is their lack of timeliness. True or False
True
Radio advertising offers a high degree of selectivity.
True or False
True
News releases are the least used type of publicity.
True or False
False
A women’s apparel manufacturer most likely will use

A. intensive distribution.
B. selective distribution.
C. exclusive distribution.
D. high-style distribution.
E. popular style distribution.

B. selective distribution.
Category management is

A. a producer deciding which category to concentrate on for the next season.
B. a retailer asking the supplier in a particular category how to stock the shelves.
C. when suppliers tell the manufacturer which category to produce more of.
D. when Home Depot decides which category sells the best and decides to concentrate on that category of goods.
E. the combined efforts of producers and wholesalers to manage the wholesaler’s inventory.

B. a retailer asking the supplier in a particular category how to stock the shelves.
Haley is shopping for a new outfit to wear to an awards banquet where she will be honored. She has found a beautiful outfit at Banana Republic and a new pair of shoes at Designer Shoe Warehouse. What type of stores are these?

A. Warehouse Club
B. Convenience
C. Specialty
D. Department
E. Off-Price

C. Specialty
Which one of the following is an example of a category killer?

A. Kmart
B. 7-Eleven
C. Home Depot
D. Burlington Coat Factory
E. Macy’s

C. Home Depot
Which activity combines inventory management, order processing, warehousing, material handling, and transportation?

A. Marketing
B. Merchandising
C. Warehousing
D. Physical distribution
E. Transporting

D. Physical Distribution
Choose the correct order of the following three of the eight steps in developing an advertising campaign.

A. Create the advertising platform; identify and analyze the target audience; define the advertising objectives.
B. Identify and analyze the target audience; create the advertising platform; define the advertising objectives.
C. Identify and analyze the target audience; define the advertising objectives; create the advertising platform.
D. Define the advertising objectives; identify and analyze the target audience; create the advertising platform.
E. Define the advertising objectives; create the advertising platform; identify and analyze the target audience.

C. Identify and analyze the target audience; define the advertising objectives; create the advertising platform.
Salespeople may be identified as

A. experts, order makers, and support personnel.
B. order preparers, order trackers, and order receivers.
C. order getters, order takers, and support personnel.
D. order getters, order makers, and order receivers.
E. order getters, order dictators, and support personnel.

C. order getters, order takers, and support personnel.
The first step in the personal-selling process is

A. product display.
B. prospecting.
C. approaching the prospect.
D. organizing the sales pitch.
E. making the presentation.

B. prospecting.
Closing the sale is considered the critical point in the selling process. Many salespeople use a trial closing. Based on an assumption that the customer is going to buy, which of the following statements is an appropriate trial closing?

Answer
A. “Will you be placing an order, Mrs. Johnston?”
B. “Would you like the standard or the deluxe model?”
C. “Here’s my card. Give me a call if you would like to place an order.”
D. “Shall I give you a week to consider the offer?”
E. “I’ll put you down for the deluxe model. Is that your natural hair color?”

“Would you like the standard or the deluxe model?”
Deloitte, a public accounting firm, helps to underwrite the musical production “Mama Mia” currently playing at the Theater Center. Why would the accounting firm do this? What is Deloitte creating?

A. Point-of-purchase activity
B. Sales promotion
C. Public-relations activity
D. Community-service activity
E. Cooperative advertising

Public-relations activity
Major Steps in Developing an Advertising Campaign
Public-relations activities might include
a. all of these choices.
b. company magazines.
c. newsletters.
d. brochures.
e. sponsorship of programs on public radio and television.
a. all of these choices.
Heavy machinery and major equipment installations are usually distributed directly from producer to business user.
a. True
b. False
a. True
Wholesalers help manufacturers by performing functions similar to those provided to retailers.
a. True
b. False
a. True
Few retailers are independent retailers.
a. True
b. False
b. False
A disadvantage of truck transportation is its inflexible delivery schedules.
a. True
b. False
b. False
The makeup of the promotion mix depends on the characteristics of the target market.
a. True
b. False
a. True
Trade and industry associations, such as the California Milk Processor Board, are the major users of selective-demand advertising.
a. True
b. False
b. False
The focus of primary-demand advertising is image building.
a. True
b. False
b. False
Critics argue that advertising is wasteful.
a. True
b. False
a. True
The middleman who buys from producers or other middlemen and sells to consumers is the
a. agent middleman.
b. merchant agent.
c. wholesaler.
d. merchant middleman.
e. retailer.
e. retailer.
Breaking down large quantities, having an assortment on hand, and providing promotion, market information, and financial aid are all services that
a. wholesalers provide to retailers.
b. manufacturers provide to wholesalers.
c. retailers provide to wholesalers.
d. wholesalers provide to manufacturers.
e. retailers provide to manufacturers.
a. wholesalers provide to retailers.
Merchant wholesalers may be generally classified as full-service wholesalers or limited-service wholesalers, depending on the
a. width of their product mixes.
b. dollar value of their sales.
c. range of the wholesaler services provided.
d. size of their warehouse or warehouses.
e. width of their product line.
c. range of the wholesaler services provided.
In which channel do producers sell directly to consumers to better control the quality and price of their products?
a. Producers to wholesalers to retailers to consumers
b. Producers to retailers to consumers
c. Producers to agents to consumers
d. Producers to agents to wholesalers to retailers to consumers
e. Producers to consumers
e. Producers to consumers
The major elements in an organization’s promotion mix are
a. site, store hours, facilities, customer service, pricing, buying, and promotion.
b. advertising, personal selling, publicity, and public relations.
c. advertising, personal selling, public relations, and sales promotion.
d. promotion, price, product, and distribution
c. advertising, personal selling, public relations, and sales promotion.
A paid, nonpersonal message communicated to a selected audience through a mass medium is called
a. personal selling.
b. promotion.
c. advertising.
d. sales promotion.
e. publicity.
c. advertising.
The most selective medium is
a. television.
b. direct mail.
c. newspapers.
d. radio.
b. direct mail.
A problem with clearly false and deceptive advertising might properly be reported by a consumer to the
a. Federal Trade Commission.
b. Social Security Administration.
c. Federal Advertising Investigation Liaison Committee.
d. Occupational Safety and Health Administration.
e. National Labor Relations Board.
a. Federal Trade Commission.
The first step in the personal selling process is
a. approaching the prospect.
b. prospecting.
c. closing the sale.
d. answering objections.
b. prospecting.
Public-relations activities might include
a. all of these choices.
b. company magazines.
c. newsletters.
d. brochures.
e. sponsorship of programs on public radio and television.
a. all of these choices.
Which is NOT a characteristic of a contract carrier?
a. available for hire by shippers
b. does not serve the general public
c. is owned and operated by the shipper
d. the number of shippers must be limited
c. is owned and operated by the shipper
The main function of promotion is to
a. stabilize sales.
b. provide information.
c. increase market share.
d. enhance the effectiveness of each of the other ingredients of the marketing mix.
b. provide information.
A missionary salesperson sells products primarily for nonprofit organizations.
a. True
b. False
b. False
Wholesaler services to manufacturers include all of the following except
a. assuming credit risks.
b. providing financial aid.
c. reducing inventory costs.
d. providing a sales force.
b. providing financial aid.
Coupons cannot be targeted to specific customers.
a. True
b. False
b. False
Multiple channels of distribution are often used to capture a larger share of the market.
a. True
b. False
a. True
What type of advertising is best for Honda to introduce and promote a new year model national?
a. regional time
b. local time
c. network time
d. sponsorship
e. spot time
c. network time
A company determines which type of distribution channel to use based on the company’s production capabilities.
a. True
b. False
b. False
Selective demand (or brand) advertising
a. is used to sell a particular brand of product.
b. consists of the various forms of communication through which advertising reaches its audience.
c. is advertising designed to enhance a firm’s image or reputation.
d. would most often be sponsored by trade or industry associations.
a. is used to sell a particular brand of product.
You own a fresh flower business that ships flowers to customers located in many parts of the country. Which mode of transportation best meets your company’s needs?
a. waterways
b. airplanes
c. piggyback
d. railroads
d. railroads
What is the last step in the personal-selling process?
a. Prospecting
b. Following up
c. Making the presentation
d. Answering objections
b. Following up
Infotech Resources Inc. is a new start-up company with a relatively small promotional budget. The optimal promotional strategy for Infotech would probably be
a. local advertising.
b. sales promotion.
c. national advertising.
d. personal selling.
The first step in developing an advertising campaign is to define the advertising objectives.
a. True
b. False
b. False
Doug has been to every department store, discount store, and traditional specialty store in town looking for the specific action figure his son wants for his birthday. If Doug has time to try only one more place, he should probably go to which type of retail store?
a. superstore
b. convenience store
c. category killer
d. off-price retailer
c. category killer
An order getter is involved with creative selling.
a. True
b. False
a. True
Which of the following activities does warehousing NOT include?
a. sorting and dispatching goods to storage
b. producing goods
c. recalling, picking and assembling goods
d. dispatching shipments
b. producing goods
A ________ salesperson assists a company’s current customers by explaining how to use a product, how it is made, or how a system is designed.
a. missionary
b. human resource
c. technical
d. trade
c. technical
A specialty-line wholesaler carries a select group of products within a single line.
a. True
b. False
a. True
Institutional advertising promotes specific brands of products and services.
a. True
b. False
b. False
A trade sales promotion method attracts consumers to particular retail stores and motivates them to purchase certain new or established products.
a. True
b. False
b. False
Which of the following is not one of the major steps in developing an advertising campaign:
a. develop the media plan.
b. identify and analyze the target market.
c. close the sale.
d. define the objective.
c. close the sale
Incentive trips such as golf outings or product “push” programs aimed at vendors would be classified as which component of the promotion mix?
a. Personal selling
b. Advertising
c. Sales promotion
d. Public relations
c. Sales promotion
Which type of distribution coverage would a convenience good, like candy, most likelyuse?
a. Warehousing
b. Intensive distribution
c. Selective distribution
d. Exclusive distribution
e. Physical distribution
b. Intensive distribution
The American Express television promotion “Don’t Leave Home Without It” is an example of
a. public relations.
b. refunding.
c. creative selling.
d. publicity.
e. advertising.
e. advertising.
L’eggs hosiery, packaged in large plastic eggs contained directly beneath the visual advertising, would be considered a
a. cooperative advertising.
b. comparative advertising.
c. promotional campaign.
d. primary-demand advertising.
e. point?of?purchase display.
e. point?of?purchase display.
J & A Communications is focused primarily on personal selling and sales promotion for its clients. J & A believes that a major part of personal selling is making connections, listening, and continuing the developed relationships over time. Its sales promotion side is focused on programs that get the company’s product in the hands of its consumers. J & A conducted an extensive search for a leader in the public relations field and now, after acquiring one of the best in the Northwest, the company is ready to launch a public relations branch ofits well-respected company.

When J & A trains employees to work on personal-selling programs, it teaches that the critical point in the selling process is
a. prospecting.
b. closing the sale.
c. answering objections.
d. approaching the prospect.
e. following up.

b. closing the sale.
The content and form of an advertising message are influenced least by
a. the objectives of the campaign.
b. a product’s features.
c. the choice of media.
d. the characteristics of the target market.
e. the competitor’s promotion.
e. the competitor’s promotion.
Selective-demand advertising
a. enhances a firm’s image or reputation.
b. is by far the most common type of advertising.
c. increases the demand for all brands of a product.
d. personally informs customers about a product.
e. delivers a news story about a product.
b. is by far the most common type of advertising.
Creative selling involves perceiving buyers’ needs, supplying information about a firm’s products, and persuading customers to buy the product. Which type of salesperson does this job?
a. Missionary salesperson
b. Technical salesperson
c. Trade salesperson
d. Order-getter
e. Order-taker
d. Order-getter

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