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Overview
Whether you work for someone else, own your own
business, or seek employment, you probably have
questions about business. What must a company do to
make a profit and stay in business? What are the main
functions or activities of a business? How does a business
keep its employees happy and productive, and how can
an employee help the company make a profit? This course
presents basic information about the main functions of a
business. Gaining knowledge about business functions will
enable you to discuss the primary goals and functions of a
business.
This course includes eight lessons. Lesson 1 discusses
basic types and functions of businesses. Lessons 2 and 3
explore the management and human resources (HR)
functions. Lessons 4, 5, and 6 examine the functions of
production and operations, inventory and purchasing, and
accounting. Finally, Lessons 7 and 8 describe the
marketing and sales function and the customer service
function.
Overview
i
This course includes special features. Each lesson
contains both a practice case study and an assignment
case study, giving you the opportunity to apply business
concepts to realistic scenarios. Moreover, the lessons and
case studies feature examples from various types of
businesses. These types include manufacturing, service,
distributors and retailers, financial services, utilities, real
estate, and transportation.
This course uses examples of U.S. businesses. Business
laws and practices are different throughout the world. If
you live outside the United States, check business laws
and practices in your country. If you have questions about
doing this research, talk to your instructor. Also note that
this course does not discuss nonprofit organizations in
detail. The emphasis is on for-profit businesses.
The section reviews in each lesson are for your personal
development only. Do not send your responses to your
Hadley instructor. Rather, check your comprehension by
comparing your answers with those provided. You can
always contact your instructor, however, to clarify
concepts.
Overview
ii
You are required to submit eight assignments, one at the
end of each lesson. These assignments enable your
instructor to measure your understanding of the material
presented in the lessons. Refer to the "Getting Started"
instructions for information about submitting assignments.
If you are ready to explore the fundamentals of business,
begin Lesson 1: What Is a Business?
Overview
iii
Overview
iv
Lesson 1: What Is a Business?
A business is an organization that exists for the purpose of
making a profit by selling products or services to
customers. Owners take a risk by investing time, money,
and energy into the business. By taking this risk, they
hope to make money.
Businesses range from one-person consulting practices,
to restaurants and retail shops, to midsize and large
corporations. Knowing basic information about how
businesses work is helpful for both employment and
career advancement. This lesson describes the primary
forms of ownership. It then gives examples of different
types of businesses and lists the main functions of a
business. Finally, it shows how to apply business concepts
to a real-life scenario. Learning basic information about
businesses will enable you to discuss the primary goals
and functions of a business.
Objectives
After completing this lesson, you will be able to
a. identify forms of ownership
b. list types of businesses
Lesson 1: What Is a Business?
1
c.
name functions of businesses
d.
apply business concepts to a real-life scenario
Forms of Ownership
You're probably familiar with a wide variety of businesses,
from the one-person repair shop to the partners at your
doctor's office. From large department stores to computer
companies to credit unions, various businesses provide
you with goods and services. They may also provide
employment opportunities.
Four standard types of ownership exist: sole
proprietorship, partnership, corporation, and cooperative.
These four types vary greatly, and each has advantages
and disadvantages. In addition, nonprofit organizations
exist, although they use their profit to maintain their
services.
Sole Proprietorship
A business owned by one person is a sole proprietorship.
Dentists, lawyers, consultants, shop owners, and many
others choose this type of ownership. The owner may
operate the business by him- or herself or employ others.
Lesson 1: What Is a Business?
2
The sole proprietor can own and run the business in his or
her own name, such as Adam Smith, Plumber.
The proprietor can also name the business Reliable
Plumbing. This type of name is known as a "doing
business as" (DBA).
A sole proprietor has total and unlimited personal liability
for the business's debts. In other words, the owner is
financially responsible for everything that happens in the
business. If you are a sole proprietor, the law considers
you and your business as one legal identity.
If you are a sole proprietor, business accounts are
considered the same as personal accounts for the
purposes of taxes and liability. The first advantage of this
setup is that business owners avoid a double tax. They
pay only personal taxes. They do not file a separate
business tax return. The second advantage is that they
may deduct business losses from their personal tax return.
One major advantage of being a sole proprietor is that you
do not have to register the business with the state and pay
a large fee. The business may need some kind of local
license or permit, however. The major disadvantage is that
you are personally liable, or responsible, for all the debts.
Lesson 1: What Is a Business?
3
For example, a plumber who accidentally floods a
customer's basement is personally liable for the damages
caused by the flood.
Partnership
A business owned by two or more people who have the
common goal of making a profit is a partnership. They
become partners to increase efficiency or to combine
resources and expertise. As with a sole proprietorship, the
owners do not have separate legal identities from the
business. Partners may own and run the business in their
own names: Lopez and Malek's Diner. Or they may use a
DBA name such as Village Restaurant.
The major advantage and disadvantage of a partnership
are like that of the sole proprietorship. The major
advantage is that the partners do not have to register with
the state and pay a large fee. The major disadvantage is
that the partners are personally liable for debts, including
lawsuits and insurance claims. Two different types of
partnership exist, the limited partnership and the general
partnership.
Lesson 1: What Is a Business?
4
Limited Partnership
In a limited partnership, the partners are responsible only
for their specific individual contributions to the business.
For example, suppose Frank Caruso invests $50,000 as a
limited partner in a candy business. If the business ends
up losing a million dollars, the most Frank can lose is
$50,000.
General Partnership
In a general partnership, the partners put everything on
their personal tax returns. They are equally responsible for
debts and losses, no matter how much they individually
invest, or pay into the business. Think of the example of
the candy business. If Frank was a general partner and
the business lost a million dollars, Frank might lose half a
million dollars, even though he invested just $50,000!
Corporation
A business that has a separate legal identity from its
owners is a corporation. In other words, suppose Mystery
Books is run by a corporation, and Jane Perez is one of
the owners. Now suppose that Bridget Green sues
Mystery Books because she suffered such terror after
Lesson 1: What Is a Business?
5
reading a book she bought there. If Bridget Green wins
her case, she may get money from the actual corporation,
but Jane Perez's personal bank account would remain
safe.
Corporations have their own names. For example, the
Hudson Bay Company, established in 1670, is the oldest
commercial corporation in North America and one of the
oldest in the world. Note that even if a corporation has the
name of its owner, it has a separate legal identity. For
example, consider the example of Mystery Books. Even if
the store were called Jane Perez Books, it still would have
a legal identity separate from Jane Perez.
Most corporations register as either stock or nonstock
companies. Shareholders are people who invest in the
corporation by buying stock, or part of what the business
is worth. Shareholders elect people who run the
corporation. A corporation is managed by a board of
directors. All corporations, whether stock or nonstock, hire
managerial staff to operate the business. Nonstock
companies do not have shareholders; they have members
with voting rights.
Lesson 1: What Is a Business?
6
A corporation owns and runs the business as a separate
entity from its owners or shareholders.
With only a few exceptions, none of the shareholders in a
corporation are obligated for the debts of
the corporation. Creditors can look to only the
corporation's assets for payment. Assets are the net worth
of a company, including its capital, inventory, and cash.
The main disadvantage of a corporation, however, is that
both the corporation itself and its shareholders are taxed.
In addition, it is more difficult to set up a corporation, and
owners pay legal and licensing fees.
Cooperative
A cooperative, or co-op, is a business owned by multiple
people. Often, its customers own and run the business,
and membership gives them decision-making authority
over the business. Unlike a partnership, members do not
have total and unlimited personal liability for the debts
incurred by the business. They have the same type of debt
protection found in corporations.
Co-ops, unlike most businesses, look for price savings
rather than profit. Many types of co-ops exist in health
care, insurance, food stores, and credit unions. Their goal
Lesson 1: What Is a Business?
7
is to provide members with quality goods and services at
the lowest costs. On the other hand, the majority of
businesses are for-profit ones and sell goods at the
highest price that the customers are willing to pay.
Most co-ops follow a set of principles that often include

voluntary and open membership

democratic member control

the promotion of education among the members
Nonprofit Organizations
According to the Society of Nonprofit Organizations, "The
difference between nonprofit and for-profit organizations is
that nonprofits use their profits to advance their programs,
while for-profits distribute their profits to their owners or
stockholders." The society categorizes nonprofit
organizations as trade associations, charitable
organizations, social clubs, government groups, and
political groups. Nonprofit organizations use many of the
principles outlined in this course for their own purposes.
Lesson 1: What Is a Business?
8
Section Review
Select the best item to answer each of the following
questions.
1. For what purpose does a business exist?
a. to sell products or services to customers to make
a profit
b. to buy products and services from customers
c. to make laws
The correct answer is (a). The purpose of a business
is to sell products or services to customers to make a
profit.
2. How many owners are in a sole proprietorship?
a. one
b. only two
c. unlimited
The correct answer is (a). A sole proprietorship is a
business owned by one person.
3. What is the major advantage of a partnership?
a. The partners have involved stockholders.
b. The partners do not have to register with the state
and pay a large fee.
Lesson 1: What Is a Business?
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c. The partners are not personally liable for any
debts.
The correct answer is (b). The major advantage of a
partnership is that the partners do not have to register
with the state and pay a large fee.
4. What type of ownership usually has stockholders?
a. cooperative
b. partnership
c. corporation
The correct answer is (c). A corporation usually has
stockholders who invest by buying stock.
5. What form of business looks for price savings rather
than profit?
a. cooperative
b. sole proprietorship
c. corporation
The correct answer is (a). A cooperative, or co-op, is
a form of business that looks for price savings rather
than profit.
Lesson 1: What Is a Business?
10
6. How does a nonprofit organization differ from a
business?
a. A nonprofit does not need money to operate.
b. A nonprofit distributes profits to stockholders.
c. A nonprofit uses profits to advance programs.
The correct answer is (c). A nonprofit organization
differs from a business in that it uses its profits to
advance its programs.
Four main types of business ownership exist: sole
proprietorship, partnership, corporation, and cooperative.
Some business organizations are nonprofit. The next time
you work with a business, use this information to identify
which type it is.
Types of Businesses
The easiest way to classify businesses is by how they
generate revenue, or gain income, and make a profit. Most
businesses fall into the following eight types:




manufacturing
service providers
distributors and retailers
agriculture and mining
Lesson 1: What Is a Business?
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



financial services
utilities
real estate
transportation
These types of business vary greatly, and each has a
unique structure and purpose. You can start to understand
them by looking at examples of each type. Note that many
additional types of small businesses prosper, or succeed,
by providing goods and services to these major industries.
Manufacturers
Businesses that produce products from raw materials or
by assembling parts are manufacturers. These companies
make physical goods such as cars or machines. Some
large companies, like John Deere, make farm equipment.
Other midsize companies manufacture pharmaceuticals,
or medicine; electronics; steel; plastics; food; beverages;
and so on. Access Tech Creations (ATC) is a midsize
company that manufactures access technology for
computer systems. Some small manufacturers create new
technologies or make parts.
Lesson 1: What Is a Business?
12
Service Providers
Businesses that offer intangible goods or services are
service providers. They make a profit by charging for labor
or other services to governments, other businesses, and
consumers. For example, a consultant, interior designer,
or information technology vendor may charge for services
by the hour or a fixed price. Hotel and hospitality workers
provide lodging and service.
Restaurants are considered service providers because
they serve customers, even though food is a tangible
good. Restaurants are unique in that they blend
manufacturing and service. For example, the Business
Enterprise Program (BEP) trains and licenses legally blind
individuals to manage cafeterias and snack bars in
government buildings. This program was established in
1937 by the Randolph-Sheppard Act. These cafeteria
managers and their staff are service providers, even
though they provide food, which is an actual product.
Distributors and Retailers
Companies that make a profit by distributing and selling
items are known as distributors and retailers. The
distributor is the middleman between the manufacturer
Lesson 1: What Is a Business?
13
and retail stores. The distributor receives goods directly
from the manufacturer, storing items in warehouses. The
distributor then sells the goods to various retail stores.
Most stores and catalog companies are retailers or
distributors. An online bookstore such as Amazon.com is a
distributor. The corner bookstore is a retailer.
Retailers get items from the distributors and then resell
them to the consumers. Retailers can be large or small.
Some like J.C. Penney are huge, with stores nationwide.
Others, like the corner mom-and-pop grocery store, are
small. For example, J.C. Penney purchases thousands of
dresses that they put on sale at their stores. The owners
of the small grocery store may purchase about a hundred
loaves of bread that they sell to neighborhood customers.
A franchise is a special kind of retail business. One
example is Supercuts, which has haircutting salons in
many cities across the United States. A franchise acquires
a trademark and uses a proven way of doing business to
make a profit. Each store has its own owner, and this
owner pays a fee and percentage of sales to the
franchisor. In this case, the owner would pay Regis
Lesson 1: What Is a Business?
14
Corporation, the company that owns the Supercuts
franchise.
Last, some businesses make money by selling intellectual
property, or intangible goods. Movie studios and book
publishers fall into that category. They sell the ideas of
writers and other artists to the public.
Agriculture and Mining
Businesses that produce raw material are in the
agriculture and mining category. Agricultural businesses
grow the crops and process the cattle. Mining companies
extract ore, coal, gold, silver, diamonds, nickel, salt, tin,
uranium, and other metals.
Agriculture still has some independent farmers working the
land, but large corporations now own many farms in the
United States. Also, big businesses conduct mining
because of the amount of capital needed to dig in a mine.
Financial Services
Businesses such as banks and other companies that
make a profit by helping others invest and manage money
are in the financial services category. A bank issues
money, receives deposits, lends money, processes
Lesson 1: What Is a Business?
15
transactions, creates credit, and provides many other
financial services. In recent years, the finance industry has
created other companies that provide services for a fee.
These financial service providers include credit card
companies, insurance carriers, and stockbrokers.
Utilities
Companies that provide public services such as gas,
electricity, telephone, water, and sewage treatment are
utilities. Local governments often regulate utilities to make
sure they are competent and ethical. That is, it is important
that utilities provide their services properly, safely,
satisfactorily, and honestly. Utilities employ electrical,
mechanical, civil, manufacturing, and industrial engineers.
They also may hire software engineers, power linemen,
trade apprentices, and trade support staff.
Real Estate
Businesses that make money by selling, renting, and
developing properties, homes, and buildings are in the real
estate category. Some companies appraise property; that
is, they determine the value of property. Others serve as
brokers, helping buyers and sellers come to an
agreement. Some real estate businesses develop new
Lesson 1: What Is a Business?
16
buildings, and others act as landlords to renters. Some
even help people relocate from one part of the country to
another.
People who legally represent a buyer or a seller in a real
estate transaction need a license. They are called real
estate agents. If they join a national association, they are
known as realtors.
Lesson 1: What Is a Business?
17
Transportation
These businesses transport goods and individuals from
one location to another. They generate profit on the
transportation cost. The transportation can occur on the
road, air, water, or rail. Companies such as United Parcel
Service (UPS) and
FedEx transport
items. Greyhound,
Amtrak, Delta, and
American Airlines
transport people
and goods.
Section Review
Indicate whether the following statements are true or false.
If the statement is false, reword it to make it true.
1. Service providers make products from raw materials
or by assembling parts.
False. Service providers offer intangible goods or
services. Manufacturers make products from raw
materials or by assembling parts.
2. A franchise is a special kind of retail business.
Lesson 1: What Is a Business?
18
True
3. Agriculture and mining businesses produce raw
materials.
True
4. Financial services companies provide public services
such as gas and electricity.
False. Financial services make a profit by helping
others invest and manage money. Utilities are
companies that provide public services such as gas
and electricity.
5. UPS, FedEx, Greyhound, and Amtrak are real estate
businesses.
False. UPS, FedEx, Greyhound, and Amtrak are
transportation businesses because they deliver goods
or individuals from one place to another. Real estate
businesses sell, rent, and develop properties, homes,
and buildings.
Eight main types of businesses exist. They are
manufacturing, service providers, distributors and retailers,
Lesson 1: What Is a Business?
19
agriculture and mining, financial services, utilities, real
estate, and transportation. If you work for a business,
determine which type it is.
Functions of Businesses
People organize their businesses in a variety of ways. A
typical business has seven major areas, or functions:

management





human resources (HR)
production and operations
inventory and purchasing
accounting
marketing and sales

customer service
The word function means an activity or duty. A function is
sometimes handled by a department or area, as
sometimes a whole group of people are responsible for
one function. For example, a large company may have
one department that handles marketing and sales.
Sometimes, however, one person performs many
functions. For example, a huge company like Payless
ShoeSource has separate departments for each function.
Johnny's Shoe Repair Store near the mall, however, is a
Lesson 1: What Is a Business?
20
one-person business. Johnny may perform all the
business functions himself or hire others to do them.
This section gives brief definitions of the different business
functions. Each function is explained in more detail in
subsequent lessons.
Management
The top level of leadership within a business is
management, which is responsible for the success or
failure of the business. Managers direct and control a
group of one or more people toward accomplishing a goal.
They ensure that people accomplish business goals to
achieve their company's mission and vision. They make
sure that employees work effectively to meet their
customers' needs. Managers often decide who to hire,
how to use financial or other resources, and how to use
technology. Management may decide to open new
locations and hire dozens of people. Or management may
decide to lay off employees because automation, where
machines and computers replace human labor, or other
companies can do tasks more efficiently.
Lesson 1: What Is a Business?
21
Big businesses often have many levels of management,
from executives to middle managers to supervisors. The
executives are people at the top level of management.
The middle managers are in charge of the supervisors,
and the supervisors manage the workers. Midsize
businesses have fewer managers, and small businesses
may have only one or two.
Human Resources
The function responsible for the hiring and firing of
employees is human resources (HR). People in HR control
compensation and payroll, and they manage employee
benefits. They make sure that everyone follows labor laws
and regulations. They mediate disputes and provide
training and development. In a small business, the HR
person may perform other tasks, too.
A big business may have one HR person per hundred
employees. This ratio is a best practice recommended by
the Society of Human Resource Management. If a
business opens a new location and hires additional
employees or if it lays people off, HR organizes the
staffing and other changes.
Lesson 1: What Is a Business?
22
Production and Operations
The function that makes the business's product or delivers
the business's service is production and operations. This
function figures out how to get the products to the
customers. It is also responsible for providing customers
with services. In manufacturing, production and operations
may use raw materials to make products. Distributors may
use production and operations to figure out how to get the
products to market. Retailers like Sears or Walgreens use
production and operations to strategically determine where
to put the products in the store. Transportation companies
such as UPS and FedEx may use their production and
operations function to figure out delivery routes.
A large production and operations area may even have
subdivisions. For example, this function may employ
information technology staff to run the computers. They
may hire people in product management to emphasize
quality. They may even have a research and development
department that invents new products.
A financial services organization such as an insurance
company may employ efficiency experts called business
analysts. These experts create workflows and standard
Lesson 1: What Is a Business?
23
operating procedures (SOPs). A workflow shows the rate
at which the company, specific departments, or specific
employees should complete certain tasks. An SOP shows
the way a task is generally to be done and includes
definite steps.
If a business opens a new location, production and
operations makes sure all the work gets done. This
function also determines if new computers or other
technology is needed.
Inventory and Purchasing
The function of inventory and purchasing takes care of the
stock, or merchandise and supplies. The purchasing part
is responsible for buying the materials and services
necessary to run the business. They generate purchase
orders and receive bills. The inventory people keep track
of the company's assets. They make sure that the right
products go to the correct customers, reordering when
necessary. They fill orders, and carefully manage the
shipping of merchandise and supplies.
Lesson 1: What Is a Business?
24
When a business opens a new location, the inventory and
purchasing function does not get involved right away. But
later, they may remove or replenish inventory.
Accounting
The accounting function is responsible for financial
reporting. Employees who handle this function keep track
of the capital and invest it to make more money. They may
pay the bills with a system called accounts payable. They
create invoices and charge the customers, collecting
money with a system called accounts receivable. They
keep track of all transactions with a system known as the
general ledger. In big businesses, they work with a finance
department that often invests their business capital. In
addition, they pay the taxes. This function generates many
reports that tell management how well the company is
performing. Lesson 6 discusses these reports in more
detail.
Accounting may also employ internal or external auditors
who double-check the
accounting books at
least once a year. The
auditors make sure that
Lesson 1: What Is a Business?
25
no one is breaking the law. Accounting and financial
reports may persuade management to open a new
location and hire additional employees. Or these reports
may convince management that it is necessary to lay off
people. The accounting function also approves the
purchase of new computers or software to replace people
or to fill a new office.
Marketing and Sales
The function of marketing and sales is to promote and sell
products and services to the customers. The marketing
people are responsible for an overall marketing plan that
includes advertising and a brand name. They employ
communications and public relations people who give
information to employees and the public.
The sales section actually sells the products. Salespeople
manage relationships with the customers and keep the
customers satisfied. A salesperson can be someone who
sells raw steel to other businesses or someone who sells
a car to a person. A salesperson can also be a person
who runs a cleaning service, a clerk at a drugstore, or a
waiter at a restaurant. Salespeople bring in the money that
makes a business successful.
Lesson 1: What Is a Business?
26
When a business makes strategic changes, such as
introducing new products or hiring talented staff, marketing
and sales shares information with the affected employees
and the public. Marketing and sales may promote this
change as a way to control costs to the customer base.
Customer Service
The customer service function involves the behavior and
practices of a company's employees before, during, and
after the sale of the product. Customer service is a series
of activities designed to make the customer happy. Its
importance varies by company and by situation. For
example, an expert customer may not need a lot of help
before purchasing a product. A new customer, however,
may ask for detailed explanations and a significant amount
of assistance.
Friendly workers enable a retail store or a restaurant to
help the customer. A smile in the voice of an employee
answering the phone is also part of good customer
service. In addition, companies use great service to
continue relations after the sale is complete. Sometimes,
an employee follows up with a customer to make sure that
Lesson 1: What Is a Business?
27
everything is all right. Other times, employees apologize
and fix mistakes.
Customer service is all about communicating with the
customer. It is great when an employee really listens to
the customer and really cares about the person. The
phone or computer system can enable companies to make
transactions fast and easy for their customers. If the
business is on the Internet, over the telephone, or in a
catalog, the employees may take care of customers even
from a significant distance.
Sometimes, the best customer service occurs when an
employee fixes a problem for a customer. Some
businesses have customer service departments. These
departments specialize in helping the customer on the
phone, with email, or from behind a counter at a store.
Section Review
For each of the following definitions, give the correct
business function.
1. the series of activities designed to make the customer
happy
customer service
Lesson 1: What Is a Business?
28
2. the top level of leadership within a business
management
3. the function responsible for the hiring and firing of
employees
HR
4. the function responsible for financial reporting
accounting
5. the function that makes the business's product or
delivers its service
production and operations
6. the function that takes care of the stock on the shelf
inventory and purchasing
7. the function that sells the products and services to the
customers
marketing and sales
Every business has seven major functions. These are
management, HR, production and operations, inventory
Lesson 1: What Is a Business?
29
and purchasing, accounting, marketing and sales, and
customer service. The next time you interact with a
company employee, identify the function of that person.
Applying Business Concepts to a
Real-Life Scenario
Whether you run your own business or work for someone
else, it is important to know the forms of ownership and
the types and functions of a business. This helps you
make good business decisions. Information from the
previous sections can help you recognize business
concepts in everyday life.
Read the following case study. A question concerning the
case study follows in the section review.
Case Study
Who: Mutual Insurance
Where: Chicago, Illinois
What: Large property/casualty insurance company
implementing change
For more than five decades, Mutual Insurance has been
an AA-rated provider of property, liability, casualty, and
workers' compensation insurance. The AA rating means
Lesson 1: What Is a Business?
30
that this company has a solid reputation in the insurance
industry.
Mutual Insurance's upper management has authorized the
purchase of a new management information software
(MIS) system. The MIS system allows line managers and
their staff to enter business results directly into a computer
system. A line manager is someone who supervises
employees who are not managers themselves.
Upper management supported the MIS implementation
and gauged results over a 12-month period. They
concluded that Mutual's middle management was no
longer needed. Middle management people were directors
who managed line managers. The computer software now
automatically monitored results, which was the main
function of the directors.
Moreover, the task of managing the line managers has
also been eliminated. The HR department has helped the
line managers restructure their departments into work
teams. These teams operate as independent entities, and
they report their results directly to the vice president at the
upper management level.
Lesson 1: What Is a Business?
31
Section Review
Answer the following questions concerning the previous
case study. Then compare your answer to the suggested
answer.
What functions at Mutual Insurance will be involved in the
automation and personnel change? Briefly state what
each function might do. What functions might not be
involved? Why?
Suggested Answer
Most of Mutual Insurance's functions may become
involved in this project:




Management will document the strategy and assign
people to run this project.
Accounting together with the production and
operations function will coordinate the purchase of the
software. The information technology section of
production and operations will be especially involved.
HR will organize the downsizing.
Marketing and sales will promote this change as a
way to control costs to the customer base. The
communications and public relations section of
Lesson 1: What Is a Business?
32
marketing and sales will share information with
affected employees and the public.
The following functions may not be directly involved:

The inventory and purchasing function does not get
involved right away, although it may remove or refill
inventory after the change takes place.

Customer service is an overall process of keeping the
customer happy. The customer will not be directly
affected by this downsizing.
This section presented a case study for which you
identified basic business functions. The next time you
consider a real-life work situation, try to recognize the
business concepts involved.
Summary
This lesson identified the primary forms of ownership. It
then listed the different types of businesses and the main
functions of a business. Finally, it demonstrated how to
recognize business functions.
Lesson 1: What Is a Business?
33
Assignment 1
For general information on completing assignments, refer
to the "Getting Started" instructions. Then start this
assignment by giving your full name, address, and phone
number. Also list the name of this course, Assignment 1,
your instructor's name, and the date. Be sure to include
the question number along with each answer. This
assignment is worth 100 points.
Part A
Multiple Choice
Select the best item to answer each of the following
questions. (60 points total, 6 points each)
1. Which of the following is true if you are a sole
proprietor?
a. You are not liable for any debts.
b. You are personally liable for all the debts.
c. You pay personal and business taxes.
Assignment 1
35
2. What is the main difference between limited and
general partnerships?
a. responsibilities for debts and losses
b. number of owners
c. requirement to register with the state
3. What is the main similarity between corporations and
cooperatives?
a. debt protection
b. profit driven
c. keeping prices low
4. What type of business offers intangible goods and
services?
a. manufacturers
b. agriculture and mining
c. service providers
5. What type of business makes a profit by distributing
and selling items?
a. distributors and retailers
b. financial services
c. utilities
Assignment 1
36
6. What type of business helps others invest and
manage money?
a. distributors and retailers
b. utilities
c. financial services
7. In what kind of business do bus drivers and pilots
work?
a. real estate
b. distributors and retailers
c. transportation
8. What refers to the top level of leadership within a
business?
a. production and operations
b. management
c. inventory and purchasing
9. What is a series of activities designed to make the
customer happy?
a. inventory and purchasing
b. HR
c. customer service
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37
10. Which business function is responsible for reordering
products?
a. accounting
b. inventory and purchasing
c. marketing and sales
Part B
Short Answer
Read the following case study and then answer the
question. Note that many good answers are possible. (40
points total)
Case Study
Who: Mutual Insurance
Where: Chicago, Illinois
What: Large company implements change by opening an
office in a different country.
For over five decades, Mutual Insurance has been an AArated provider of property, liability, casualty, and workers'
compensation insurance. Its upper management has
decided to open a new sales office in China.
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38
The vice president of international sales considers the
following factors:





language and culture differences
communication issues with time differences
staffing in a foreign country
cost of office rent
computer connections

cost and storage of materials and supplies


differences in accounting guidelines in China
advertising and networking in China
11. What functions at Mutual Insurance will be involved in
opening a new office? Give one example of what
each function might do.
Once you have completed this assignment, send it to your
instructor. Then return to this course to begin Lesson 2:
Management.
Assignment 1
39
Assignment 1
40
Assignment 1
41