Business Environment and Concepts Flashcards

Which form of business organization provides its owners with limited liability while avoiding double taxation?

Answer: S corporation

An S corporation provides limited liability protection and passes income through to shareholders, avoiding the double taxation of C corporations.

The balanced scorecard measures organizational performance across which four perspectives?

Answer: Financial, customer, internal processes, learning and growth

The balanced scorecard framework evaluates performance from financial, customer, internal business process, and learning and growth perspectives.

Which pricing strategy sets a low initial price to gain market share quickly?

Answer: Penetration pricing

Penetration pricing involves setting a low price at launch to attract customers and quickly capture a large market share.

In capital budgeting, which method accounts for the time value of money by discounting future cash flows?

Answer: Net present value

Net present value (NPV) discounts all future cash inflows and outflows to the present using a required rate of return.

An increase in the federal funds rate most directly affects businesses by:

Answer: Reducing consumer spending power and increasing borrowing costs

A higher federal funds rate raises interest rates throughout the economy, increasing borrowing costs for businesses and reducing consumer purchasing power.

Which internal control procedure requires that no single employee be responsible for all phases of a transaction?

Answer: Segregation of duties

Segregation of duties divides responsibilities for authorization, custody, and record-keeping among different employees to reduce fraud risk.

A company's break-even point in units is calculated by dividing fixed costs by:

Answer: Contribution margin per unit

Break-even units = fixed costs ÷ contribution margin per unit, where contribution margin equals selling price minus variable cost.