AAMI Small Business Management Questions & Answers Already Passed!!

Sole Proprietorship - Answer-is a business owned by one person who is subject to claims or creditors. Partnership - Answer-is the voluntary association of two or more people who have combined their resources to carry on as co-owners of a lawful enterprise for their joint profit. Limited Partnership - Answer-involves at least one general partner and one or more limited partners. Corporation - Answer-is an artificial being, invisible, intangible, and existing only in the contemplation of law, an entity that is something that has a distinct existence separate and apart from the existence of its individual members. S Corporation - Answer-comes from the IRS Code, which permits corporations to retain the limitedliability feature of regular corporations while being taxed as partnerships. Limited Liability Company - Answer-is not a corporation but a new form of business ownership (approved in most states since approximately 1994); combines aspects of partnerships with limited liability of a corporation; owners known as members. Demand - Answer-refers to how much (quantity) of a product or service is desired by buyers. Quantity Demanded - Answer-is the amount of a product people are willing to buy at a certain price. Supply - Answer-represents how much the market can offer. Quantity Supplied - Answer-refers to the amount of a certain good producers are willing to supply when receiving a certain price. Law of Demand - Answer-if all other factors remain equal, the higher the price of a good, the less people will demand that good. The higher the price, the lower the quantity demanded. Law of Supply - Answer-demonstrates the quantities that will be sold at a certain price. The higher the price, the higher the quantity supplied.Equilibrium - Answer-when supply and demand are equal. Disequilibrium - Answer-whenever the price or quantity are not equal. Excess Supply - Answer-if the price is set too high, this will be created within the economy and cause market inefficiencies. Excess Demand - Answer-this is created when the price is set below the equilibrium price. Variable Expense - Answer-is a cost which is uniform per unit, but fluctuates in direct proportion to change in the related total activity or volume. Fixed Expenses - Answer-are a cost that, for a given period of time and range of activity called the relevant range, doesn't change in total, but becomes progressively smaller on a per unit basis as volume increases; these expenses do not increase with increased business, nor do they decrease with declining business activity. Average Pricing - Answer-an approach in which the total cost for a given period is divided by quantity sold in that period to set a price, regardless of variable and fixed costs. Operating Ratios - Answer-a comparison of profit and each item of expense in the income statement expressed as a percentage of sales income; can be compared to the industry standards in regard to measuring the possible growth of the business. Elasticity of Demand - Answer-the degree in which a change in price affects the quantity demanded. Elastic Demand - Answer-the demand that changes significantly when there is a change in the price of the product. Example would be a computer. Inelastic Demand - Answer-the demand that does not change significantly when there is a change in the price of the product. Example would be oil. Break-even analysis - Answer-is the point at which total sales revenue equals total operating costs, determined by formula or chart.Markup - Answer-is the difference between merchandise cost and selling price. Markdown - Answer-is a reduction of selling price below the original selling price. Penetration Pricing - Answer-pricing below normal to gain market share, acceptance. Skimming Pricing - Answer-pricing above normal, when the competition is weak. Follow the Leader Pricing - Answer-setting the price at a prevailing level. Variable Pricing - Answer-making price concessions to different buyers. Dynamic Pricing - Answer-is a type of variable pricing or charging more after guaging a customers financial means and desire for a product or service. Price Lining - Answer-having a range of distinct prices. What the Market Will Bear - Answer-maximizing price when competition is minor.