ISOM 125 Test 1 QUESTIONS &
SOLUTIONS(RATED A+)
Absolute Advantage - ANSWERa monopoly that exists when a country is the only
source of an item, the only producer of an item, or the most efficient producer of an item
Articles of Partnership - ANSWERlegal documents that set forth the basic agreement
between partners
Balance of Payments - ANSWERthe difference between the flow of money into and out
of a country
Balance of Trade - ANSWERthe difference in value between a nation's exports and its
imports
Board of Directors - ANSWERa group of individuals, elected by the stockholders to
oversee the general operation of the corporation, who set the corporation's long-range
objectives
Budget Deficit - ANSWERthe condition in which a nation spends more than it takes in
from taxes
Capital, or Financial Resources - ANSWERthe funds used to acquire the natural and
human resources needed to provide products.
Capitalist System - ANSWERan economic system in which individuals own and operate
the majority of businesses that provide goods and services
Cartel - ANSWERa group of firms or nations that agrees to act as a monopoly and not
compete with each other, in order to generate a competitive advantage in world markets
Corporate Charter - ANSWERa legal document that the state issues to a company
based on information the company provides in the articles of incorporation
Common stock - ANSWERstock whose owners have voting rights in the corporation, yet
do not receive preferential treatment regarding dividends
Common Stockholders rights - ANSWERThey are usually entitled to one vote per share
of common stock
Comparative Advantage - ANSWERthe basis of most international trade, when a
country specializes in products that it can supply more efficiently or at a lower cost than
it can produce other items
, Contract Manufacturing - ANSWERthe hiring of a foreign company to produce a
specified volume of the initiating company's product to specification; the final product
carries the domestic firm's name
Cooperative - ANSWERan organization composed of individuals or small businesses
that have banded together to reap the benefits of belonging to a larger organization
GATT - ANSWERa trade agreement, originally signed by 23 nations in 1947, that
provided a forum for tariff negotiations and a place where international trade problems
could be discussed and resolved
Importing - ANSWERbring in goods from another place
Inflation - ANSWERincrease in price of goods
Initial Public Offering - ANSWERselling a corporation's stock on public markets for the
first time
International Monetary Fund - ANSWERorganization established in 1947 to promote
trade among member nations by eliminating trade barriers and fostering financial
cooperation
Joint Venture - ANSWERa partnership established for a specific project or for a limited
time
Leveraged Buyout - ANSWERa purchase in which a group of investors borrows money
from banks and other institutions to acquire a company (or a division of one), using the
assets of the purchased company to guarantee repayment of the loan
Licensing - ANSWERtrade agreement in which one company—the licensor—allows
another company—the licensee— to use its company name, products, patents, brands,
trademarks, raw materials, and/or production processes in exchange for a fee or royalty
Corporation Advantages - ANSWERLimited Liability, Ease of transfer of ownership,
Perpetual life, External sources of funds, Expansion potentials
Corporation Disadvantages - ANSWERDouble Taxation, formation can be costly,
disclosure of information, Employee-owner separation
Cultural Barriers - ANSWERcultural norms, written and spoken language, body
language
Currency Devaluation - ANSWERDevaluation decreases the value of currency in
relation to other currencies
Deflation - ANSWERprices of goods drop
SOLUTIONS(RATED A+)
Absolute Advantage - ANSWERa monopoly that exists when a country is the only
source of an item, the only producer of an item, or the most efficient producer of an item
Articles of Partnership - ANSWERlegal documents that set forth the basic agreement
between partners
Balance of Payments - ANSWERthe difference between the flow of money into and out
of a country
Balance of Trade - ANSWERthe difference in value between a nation's exports and its
imports
Board of Directors - ANSWERa group of individuals, elected by the stockholders to
oversee the general operation of the corporation, who set the corporation's long-range
objectives
Budget Deficit - ANSWERthe condition in which a nation spends more than it takes in
from taxes
Capital, or Financial Resources - ANSWERthe funds used to acquire the natural and
human resources needed to provide products.
Capitalist System - ANSWERan economic system in which individuals own and operate
the majority of businesses that provide goods and services
Cartel - ANSWERa group of firms or nations that agrees to act as a monopoly and not
compete with each other, in order to generate a competitive advantage in world markets
Corporate Charter - ANSWERa legal document that the state issues to a company
based on information the company provides in the articles of incorporation
Common stock - ANSWERstock whose owners have voting rights in the corporation, yet
do not receive preferential treatment regarding dividends
Common Stockholders rights - ANSWERThey are usually entitled to one vote per share
of common stock
Comparative Advantage - ANSWERthe basis of most international trade, when a
country specializes in products that it can supply more efficiently or at a lower cost than
it can produce other items
, Contract Manufacturing - ANSWERthe hiring of a foreign company to produce a
specified volume of the initiating company's product to specification; the final product
carries the domestic firm's name
Cooperative - ANSWERan organization composed of individuals or small businesses
that have banded together to reap the benefits of belonging to a larger organization
GATT - ANSWERa trade agreement, originally signed by 23 nations in 1947, that
provided a forum for tariff negotiations and a place where international trade problems
could be discussed and resolved
Importing - ANSWERbring in goods from another place
Inflation - ANSWERincrease in price of goods
Initial Public Offering - ANSWERselling a corporation's stock on public markets for the
first time
International Monetary Fund - ANSWERorganization established in 1947 to promote
trade among member nations by eliminating trade barriers and fostering financial
cooperation
Joint Venture - ANSWERa partnership established for a specific project or for a limited
time
Leveraged Buyout - ANSWERa purchase in which a group of investors borrows money
from banks and other institutions to acquire a company (or a division of one), using the
assets of the purchased company to guarantee repayment of the loan
Licensing - ANSWERtrade agreement in which one company—the licensor—allows
another company—the licensee— to use its company name, products, patents, brands,
trademarks, raw materials, and/or production processes in exchange for a fee or royalty
Corporation Advantages - ANSWERLimited Liability, Ease of transfer of ownership,
Perpetual life, External sources of funds, Expansion potentials
Corporation Disadvantages - ANSWERDouble Taxation, formation can be costly,
disclosure of information, Employee-owner separation
Cultural Barriers - ANSWERcultural norms, written and spoken language, body
language
Currency Devaluation - ANSWERDevaluation decreases the value of currency in
relation to other currencies
Deflation - ANSWERprices of goods drop
