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Week 16 · Final study guide

Final Exam — Study Guide

Introduction to Business Free sample edition

Coverage — what the final covers

The final is cumulative, and it reaches all eight course objectives. It opens in Week 16, the finals week, and closes at the due time your instructor sets. There is no time limit, and you get one attempt. The questions appear one at a time, and you cannot go back once you move on.

Format: 40 questions, and every question counts the same. Thirty-six ask you to pick one option, and four ask you to judge a statement as true or false. Every list, statement, schedule, or set of figures a question uses is written out in words inside the question. A few questions ask for a short calculation, and scratch paper is enough for each one.

What is in scope, with the number of final questions on each course objective:

Final coverage by course objective: the weeks its questions come from, its main skills, and its number of questions out of 40
Course objective Weeks its questions come from Main skills Questions
The business and its environment (Objective 1) 15 Trade news filed in a SWOT 1
Entrepreneurship, the plan, and the legal form (Objective 2) 10 A mission statement told from an objective 1
Ethics and social responsibility (Objective 3) 9 and 11 The claims a promotion may make; legality against ethics; a fact told from a position 3
Operations and marketing (Objective 4) 9 and 13 Channels and intermediaries; place; the promotional mix; one consistent message; the break-even and markup inside the income statement 6
Organizational structure and management (Objective 5) 10 and 12 The four functions; the types of planning; headcount on a chart; a standard; leadership styles 6
People, pay, motivation, and the law (Objective 6) 11 and 12 Job description and specification; the wage floor; the statutes; bargaining; the motivation theories 9
The statements, money, and financing (Objective 7) 13 and 14 Net income; owner withdrawals; equity; the ratios; money's jobs; deposit insurance; loan interest; debt-to-equity 10
Trade and global business (Objective 8) 15 Opportunity cost; terms of trade; specialization; who owes a tariff; the entry ladder 4

All 40 questions come from the material of Weeks 9 to 15, so put most of your review there. The statements, money, and financing carry the most questions, 10, and people and the law come next with 9. By week, Week 13 has 7 questions, Weeks 9, 10, and 11 have 6 each, and Weeks 12, 14, and 15 have 5 each. By difficulty, 13 questions are easier, 17 are medium, and 10 are harder. Week 15 holds 3 of the harder ones, so practice its multi-step trade arithmetic.

The first half still matters. Eleven questions check Objectives 1 to 4, and each one sits inside a later week's material. A promotion's claims call back Week 5's ethics, and the income statement calls back Week 7's break-even. A mission statement calls back Week 3's plan, and trade news lands in Week 1's SWOT.

Topic-by-topic review

Each week gives the key idea in plain words, the course's own definitions, the coffee cart's numbers for that week, and the mistakes students make most often with their cures. Every coffee-cart figure is illustrative, built for this course. The deeper review for every topic is that week's chapter, lecture page, and slide deck.

Weeks 1 to 8 in brief — the tools the second half builds on

No question is drawn directly from these weeks, but the later weeks lean on every one of them. Keep each week's one distinction or one tool ready.

  • Week 1 — the idea and its environment. A business is any organization that sells goods or services with the aim of taking in more money than it spends. Revenue is the money that comes in from sales; profit is what is left when expenses are subtracted from revenue. A not-for-profit organization puts any surplus back into its mission instead of paying it out to owners. A stakeholder is anyone who can affect a business or is affected by it. PESTEL scans political, economic, social, technological, environmental, and legal forces. The SWOT puts strengths and weaknesses inside the organization and opportunities and threats outside it. Trap: good news outside the business filed as a strength. Cure: ask who controls it.
  • Week 2 — the market it sells into. Equilibrium is the price at which the amount buyers want matches the amount sellers offer. Below it is a shortage; above it is a surplus. The strawberry schedule settles at 5 dollars and 400 pints. Fiscal policy (spending and taxes) is set by Congress and the President; monetary policy is run by the Federal Reserve. Trap: a shortage read as "the sellers ran out". Cure: it means the price is under equilibrium.
  • Week 3 — from idea to plan. A business plan says what a business sells, to whom, how it will run, how it will be funded, and how it will earn money. The SBA's traditional plan has eight sections, including the funding request. The cart's start-up needs, 20,000 + 2,000 + 8,000 = 30,000 dollars, match 20,000 of the owner's money and a 10,000-dollar loan. Small businesses are 99.9 percent of U.S. businesses (SBA Office of Advocacy, 2026 edition), about 36 million in all. Trap: the five forces read as five competitors.
  • Week 4 — choosing a legal form. A sole proprietor answers personally for every business debt; a corporation is a legal person separate from its owners and can sell stock. An LLC is created under state law and gives its owners limited liability without being a corporation. If the cart fails, a sole proprietor could lose 30,000 dollars and a single-member LLC's owner 20,000. Trap: "limited liability" read as "cannot lose money".
  • Week 5 — what the business owes. Business ethics is the standards of right and wrong behind business choices; legality is whether the law allows an act, and the law sets only a minimum. The three ethical-reasoning questions: is it legal, is it fair to everyone it touches, and would I be comfortable if it were public. The shareholder position (Friedman, 1970) and the stakeholder position (Freeman, 1984) are presented with no verdict. Trap: "ethical means legal".
  • Week 6 — making the product. The bottleneck is the slowest step, and it sets capacity: the cart's 2-minute drink step caps it at 60 ÷ 2 = 30 drinks an hour. JIT inventory keeps a small, steady stock that arrives as needed. Trap: capacity set by the fastest step.
  • Week 7 — who buys and at what price. The four Ps are product, price, place, and promotion, with place as every decision about how the offer reaches the buyer. Break-even units = fixed costs ÷ (price − variable cost per unit) = 36,000 ÷ (5 − 2) = 12,000 drinks. Markup on cost = (price − cost) ÷ cost × 100 = 150 percent; margin on price = (price − cost) ÷ price × 100 = 60 percent. Trap: dividing fixed costs by the price.
  • Week 8 — the growth question. An organization chart shows positions and who reports to whom. Span of control is the number of people who report directly to one manager. At two carts, 1 + 2 + 2 × 2 = 7 people sit on 3 levels with a span of 2 at each level. Line positions do the core work; staff positions advise and support. Centralization keeps decisions at the top; decentralization hands them down. Trap: span of control read as the size of the whole company.

Week 9 — Reaching more customers

  • The distinction: a direct channel against an indirect one. The calculation: the promotion budget and what a sales promotion really costs.
  • Key idea: a good product still has to reach the buyer, and the buyer still has to hear about it, the same way, everywhere.
  • Definitions: distribution is every decision about how a product gets from the business that makes it to the buyer who uses it. A marketing channel is the path the product takes on the way. A direct channel runs from producer to buyer with no business in between; an indirect channel passes through one or more intermediaries. Place, the marketing-mix decision from Week 7, is every decision about how the product reaches the buyer, not only a store's address.
  • The intermediaries: an intermediary helps move a product from producer to buyer. A wholesaler buys in large amounts and resells to retailers and other businesses, not to the public. A retailer sells to the final consumer. An agent arranges sales between a seller and buyers for a fee or commission without ever owning the goods.
  • The supply chain: a supply chain is the whole series of businesses and steps that turn raw materials into a finished product in a buyer's hands. Supply-chain management coordinates the materials, information, and money that flow along it. Rising bean prices at the start of the cart's chain reach the cart's own costs.
  • The promotional mix: advertising (a paid message carried to many people at once), personal selling (a person talking one to one with a buyer), sales promotion (a short-term reward that nudges a buyer to act, such as a coupon or a punch card). The fourth is public relations (building goodwill and earning attention without paying for the message). Direct and digital marketing is often counted as a fifth element; conventions differ, so the count is never keyed. Integrated marketing communications coordinates every tool so buyers hear one consistent message across every channel.
  • The claims a promotion may make: a claim must be specific, true, and supportable. A promotion may not use invented testimonials, made-up statistics, or endorsements no one gave. The Federal Trade Commission (FTC) is the federal agency that polices deceptive advertising. Legality is the floor; ethics still asks whether the claim is fair and whether you would be comfortable if it were public.
  • Course example: the cart plans 15,000 × 5 = 75,000 dollars of first-year revenue, and its promotion budget is 0.04 × 75,000 = 3,000 dollars. At 5 − 2 = 3 dollars a drink, the budget takes 3,000 ÷ 3 = 1,000 drinks of per-unit margin to pay for. On the punch card, a loyal customer pays 9 × 5 = 45 dollars for 10 drinks that use 10 × 2 = 20 dollars of supplies.
  • Predictable mistakes → cures: (1) Promotion read as advertising only. Cure: name all four tools. (2) A wholesaler read as selling to the public. Cure: it sells to other businesses. (3) Place read as only an address. Cure: place includes how, when, and through whom. (4) A sales promotion read as free. Cure: the free item still uses its variable cost. (5) A claim read as fine because no one checks it. Cure: it must be specific, true, and supportable. (6) More tools read as a stronger message. Cure: the tools have to agree.

Week 10 — Leading the work

  • The distinction: management against leadership. The tool: the four functions of management.
  • Key idea: growing from one cart to two turns one person's job into a small management system.
  • Definitions: management is the work of directing an organization's people, money, and materials toward its goals. Its four functions form a classroom model. They are planning (deciding what the business wants to achieve and how), organizing (arranging people and resources to do the work), leading (guiding and influencing people toward the goals), and controlling (setting a standard, measuring results, comparing the two, and correcting course).
  • The types of planning: strategic (one to five years, the whole firm, such as opening the second cart), tactical (under a year, one part of the business). The others are operational (day to day, such as tomorrow's shift schedule), and contingency (what if, such as the one espresso machine breaking down). A mission statement is a short statement of what an organization does, whom it serves, and why. An objective is a specific result an organization means to reach by a set time. The business plan's sections from Week 3 all serve the mission.
  • Leadership styles, a three-way split that traces to Lewin, Lippitt, and White's 1939 study of group climates: autocratic (the leader decides alone) and participative, also called democratic (the leader involves the group first). The third is free-rein, also called laissez-faire (the group decides within broad limits the leader sets). Labels vary between courses, so the concepts are keyed, and no style is right everywhere.
  • Management against leadership: managing is planning, organizing, and controlling the work; leading is influencing people toward it. One person usually does both.
  • Managerial skills, after Katz (1955), "Skills of an Effective Administrator": technical (doing the work itself), human (working with and through people), and conceptual (seeing the whole business and how its parts fit). Technical skills matter most for a first-line manager, and conceptual skills matter most for a top manager.
  • Course example: 1 owner + 2 cart leads + 2 × 2 baristas = 7 people on 3 levels, with a span of control of 2 at each level. The break-even pace, 12,000 ÷ 250 = 48 drinks a day, is the standard each day's count is compared with.
  • Predictable mistakes → cures: (1) Management and leadership read as one thing. Cure: a person can schedule well and still fail to win the team's effort. (2) Controlling read as micromanaging. Cure: it is standard, measure, compare, correct. (3) One leadership style declared right everywhere. Cure: match the style to the moment. (4) A plan read as one kind of document. Cure: sort it by how far ahead it looks and how much it covers. (5) A specific target read as a mission. Cure: a mission says what, for whom, and why; an objective names a result and a time.

Week 11 — Hiring and the law

  • The distinctions: recruitment against selection, and a percentage point against a percent. The calculation: a hiring plan's yearly cost.
  • Key idea: hiring is a process with separate steps, and the law sets floors under every one of them.
  • Definitions: human resource management is the work of planning for, finding, hiring, training, evaluating, and paying the people a business needs. Job analysis studies what a job involves. It produces a job description (the tasks and duties of the job) and a job specification (the skills, qualities, and qualifications a person needs to do it). Recruitment draws qualified people into a pool of applicants; selection is the separate step of choosing whom to hire from that pool.
  • Developing and paying people: training teaches the skills a current job needs; development prepares a person for a future role. Performance evaluation compares a person's work with standards set in advance and gives feedback. Compensation is pay (wages or a salary) plus benefits, such as paid time off.
  • Labor relations: a labor union is an organization of workers that bargains with management as a group. Collective bargaining is the union and management negotiating a written contract. A grievance is a formal complaint that the contract has been broken. When bargaining stalls, workers may strike (stop working) and management may use a lockout (keep the workers from working).
  • The statutes, in order: the National Labor Relations Act (1935) protects private-sector employees' right to organize and bargain collectively. The Fair Labor Standards Act (1938) sets the minimum wage, overtime, recordkeeping, and child labor standards. The Taft-Hartley Act (1947) amended the 1935 Act 12 years later, and its section 14(b) lets states pass right-to-work laws. The Equal Pay Act (1963) bars paying men and women differently for substantially equal work. Title VII of the Civil Rights Act (1964) bars employment discrimination based on race, color, religion, sex, or national origin, and the same Act created the EEOC. The Age Discrimination in Employment Act (1967) protects workers aged 40 and older, and the Americans with Disabilities Act (1990) bars disability discrimination. These are general education, never legal advice; which employers a law covers is a question for the agency that administers it.
  • Real figures: the federal minimum wage has been 7.25 dollars an hour since 2009, and many states set higher ones. The union membership rate was 20.1 percent of wage and salary workers in 1983 and 10.0 percent in 2025 (BLS), a fall of 20.1 − 10.0 = 10.1 percentage points, about half the 1983 rate.
  • Course example: the cart's helper works 20 × 50 = 1,000 hours a year at 16 dollars, so 1,000 × 16 = 16,000 dollars, which is 16 − 7.25 = 8.75 dollars an hour above the federal floor.
  • The contested questions, with no verdict: supporters of unions point to a group voice and a fair hearing; critics point to higher labor costs and less flexibility. Supporters of right-to-work laws argue that no worker should have to pay a union to keep a job; opponents argue that workers who pay nothing still share the contract. Supporters of a higher minimum wage argue it raises the lowest pay; critics argue it raises costs and may lead some employers to hire fewer people. A documented fact, such as a statute's year, is stated plainly and is not a side in the debate.
  • Predictable mistakes → cures: (1) Recruiting read as hiring. Cure: the pool comes first, the choice second. (2) The minimum wage read as one number everywhere. Cure: 7.25 dollars is a federal floor. (3) A fall of 10.1 percentage points written as "10.1 percent". Cure: points measure the gap between two percentages. (4) A statute's year confused with an amendment's. Cure: 1935 is the Act, and 1947 is Taft-Hartley. (5) A falling union rate read as settling the union question. Cure: a fact is not a verdict.

Week 12 — Keeping people engaged

  • The distinction: hygiene factors against motivators. The order: the theorists by year of publication.
  • Key idea: fair pay keeps people from being unhappy, but it does not by itself make the work engaging.
  • Definition: motivation is the set of forces that start a person's effort at work, direct it toward a goal, and keep it going.
  • The classic theories, in order: Taylor (1911), The Principles of Scientific Management: study each task, find the one best way, train workers in it, and pay by output. The Hawthorne studies at Western Electric's Hawthorne Works near Chicago began with lighting tests in 1924 and ran into the early 1930s; the Hawthorne effect is a contested reading of an old study, not a settled law. Maslow (1943), "A Theory of Human Motivation": physiological, safety, love or belonging, esteem, and self-actualization needs, in a loose order Maslow himself said is not rigid. Herzberg, Mausner, and Snyderman (1959), The Motivation to Work: hygiene factors (pay, supervision, working conditions, company policy, relations at work, job security) prevent dissatisfaction; motivators (achievement, recognition, the work itself, responsibility, advancement, growth) build satisfaction. McGregor (1960), The Human Side of Enterprise: Theory X and Theory Y are two sets of a manager's assumptions about people, not two types of workers.
  • The contemporary theories, in order: equity theory, Adams (1963): people compare their own ratio of outcomes to inputs with someone else's. Expectancy theory, Vroom (1964), Work and Motivation: effort follows a belief that effort leads to performance, that performance leads to an outcome, and how much the person values that outcome. Goal-setting theory, Locke (1968): specific, hard goals raise performance more than "do your best". Theory Z, from Ouchi's book first published in 1981: long-term employment and shared decisions; its year is taught in words and never keyed.
  • From theory to application: job enlargement adds more tasks at the same level; job enrichment adds responsibility and control; job rotation moves a person among different jobs. Flexible scheduling lets people choose when they work within limits; recognition notices good work; empowerment gives employees the authority to decide about their own work. Empowerment links to Week 10's participative style and Week 8's decentralization.
  • Course example: the cart's helper earns 16,000 dollars a year in clean, safe conditions but never chooses the weekly special or trains the new hire. Hygiene factors met + motivators missing = a motivator gap. Each extra dollar an hour costs 1,000 × 1 = 1,000 dollars a year and works on pay, a hygiene factor, so the fix is enrichment, not a raise. A manager who holds Theory X assumptions may lean toward the autocratic style; one who holds Theory Y assumptions may try the participative or free-rein style.
  • Predictable mistakes → cures: (1) A hygiene factor read as a motivator ("a raise will make them love the job"). Cure: pay prevents dissatisfaction; it does not build engagement. (2) Maslow's levels read as a strict ladder. Cure: Maslow called the order loose. (3) Theory X read as a kind of worker. Cure: it describes the manager's assumptions. (4) The Hawthorne effect read as proven. Cure: it is a contested reading. (5) Taylor read as the human-relations view. Cure: Taylor studies the task; the human-relations view studies the people. (6) Enlargement read as enrichment. Cure: more of the same tasks is not more responsibility.

Week 13 — Accounting and financial statements

  • The distinctions: a point in time against a span of time, and profit against cash. The calculations: net income, the balance check, and four ratios.
  • Key idea: three statements answer three different questions, and a profitable year can still leave little cash.
  • Definitions: accounting is the work of recording, classifying, summarizing, reporting, and analyzing a business's money activity so people can decide with it. Its users are owners, managers, lenders, investors, and tax authorities. The accounting cycle in plain words: record, classify, summarize, report, analyze.
  • The accounting equation: assets = liabilities + owners' equity. An asset is something of value the business owns; a liability is a debt it owes to someone outside it. Owners' equity is the owners' claim on the assets: what they put in, plus profit kept in the business, minus what they took out. Equity is a claim, not a pile of cash.
  • The three statements: the balance sheet lists assets, liabilities, and owners' equity as of one date. The income statement reports revenue, expenses, and net income for a span of time. The statement of cash flows reports cash in and out over a span of time, grouped as operating, investing, and financing activities. Accountants show a negative amount in parentheses, such as (15,000).
  • The income statement's lines: revenue − cost of goods sold = gross profit; gross profit − operating expenses = operating income; operating income − interest expense = net income. Depreciation spreads a long-lived asset's cost over the years it is used and pays out no cash. Owner withdrawals reduce owners' equity and are never an expense on the income statement.
  • The ratios, from named lines: current ratio = current assets ÷ current liabilities; debt-to-equity = total liabilities ÷ owners' equity; gross margin = gross profit ÷ revenue × 100; net profit margin = net income ÷ revenue × 100. A ratio is a fact; whether it is strong enough for a lender is a judgment, labelled as one.
  • Course example: the cart's year: revenue 15,000 × 5 = 75,000; cost of goods sold 15,000 × 2 = 30,000; gross profit 45,000; operating expenses 35,000; operating income 10,000; interest 1,000; net income 9,000 dollars. That matches the break-even check, (15,000 − 12,000) × 3 = 9,000. At year-end, assets of 28,000 equal liabilities of 12,000 plus owner's equity of 16,000. Cash rose only 2,000 dollars, because the owner withdrew 13,000 and repaid 2,000 of the loan. The ratios: current ratio 12,000 ÷ 6,000 = 2.0; debt-to-equity 12,000 ÷ 16,000 = 0.75; gross margin 60 percent; net profit margin 12 percent.
  • Predictable mistakes → cures: (1) The balance sheet read as covering a year. Cure: it is headed "as of" one date. (2) Owners' equity read as the owners' cash. Cure: it is their claim on the assets. (3) Profit read as cash in the bank. Cure: withdrawals and loan repayments take cash without touching net income. (4) Owner withdrawals read as an expense. Cure: they reduce equity, not net income. (5) A balance sheet that does not balance accepted as close enough. Cure: check assets = liabilities + owners' equity to the dollar. (6) Gross margin read as markup on cost. Cure: gross margin divides by revenue; markup divides by cost.

Week 14 — Paying for growth

  • The distinctions: debt against equity, and stocks against bonds. The calculations: a loan's yearly interest, and debt-to-equity after each financing choice.
  • Key idea: every dollar of growth money comes either as a loan to repay or as a share of ownership to give up.
  • Money's three jobs: a medium of exchange (what buyers hand over and sellers accept), a unit of account (the yardstick prices are stated in, so two prices can be compared), and a store of value (keeping buying power for later). Some courses call the unit of account a standard or measure of value. Money does those jobs well when it is scarce, durable, portable, divisible, and widely accepted.
  • Financial institutions: a commercial bank accepts deposits and makes loans; a credit union does the same but is a financial cooperative owned by its members. A nondepository institution, such as an insurance company, a pension fund, or a brokerage firm, moves money without taking deposits.
  • The Federal Reserve: the Federal Reserve Act (1913) made it the central bank of the United States. Its three key parts are the Board of Governors (7 members), the 12 regional Reserve Banks, and the Federal Open Market Committee. Its goals are maximum employment and stable prices. Its tools, named in words, are open market operations, the discount window and its rate, reserve requirements, and interest on reserve balances. Reserve requirement ratios have been zero percent since 2020, so they are no longer an active lever. A bank's loan rate is the bank's own; the Fed does not set every rate.
  • Deposit insurance: the FDIC, created by the Banking Act of 1933, insures 250,000 dollars per depositor, per insured bank, for each account ownership category, never "per account". It covers checking, savings, money market deposit accounts, and certificates of deposit. It does not cover stocks, bonds, mutual funds, annuities, life insurance, crypto assets, or safe deposit boxes and their contents.
  • Financing: debt financing raises money by borrowing; the principal and interest must be repaid on a schedule whether or not the business earns, and the owner keeps full ownership. Equity financing raises money by selling a share of ownership; there is no interest and no repayment schedule, but the new owner shares every future profit. Stock is shares of ownership, so a stockholder is an owner; a bond is a loan to the issuer, so a bondholder is a creditor. The board of directors decides whether to pay a dividend, and it need not.
  • The markets and the investor laws: in the primary market an issuer sells new securities and receives the money; in the secondary market investors trade existing securities among themselves, and the issuer receives nothing. The Securities Act of 1933 requires investors to receive significant information about securities offered for public sale; the Securities Exchange Act of 1934 created the SEC; the Sarbanes-Oxley Act of 2002 aimed to strengthen corporate responsibility and financial disclosure. Higher expected returns come with wider swings, said in words and never computed.
  • Course example: a second cart costs 20,000 dollars. A loan at 8 percent costs 20,000 × 0.08 = 1,600 dollars a year and lifts debt-to-equity from 12,000 ÷ 16,000 = 0.75 to 32,000 ÷ 16,000 = 2.0. Selling a 25 percent share leaves the owner 100 − 25 = 75 percent and lowers debt-to-equity to 12,000 ÷ 36,000, about 0.33. Both sets of numbers are facts; which trade-off fits is a judgment the case leaves open.
  • Predictable mistakes → cures: (1) Bondholders read as owners. Cure: a bond is a loan. (2) Dividends read as required. Cure: the board decides. (3) Deposit insurance read as covering stocks or mutual funds. Cure: it covers deposits only. (4) The limit read as "per account". Cure: per depositor, per insured bank, for each account ownership category. (5) The Fed read as setting every interest rate. Cure: the lender sets its own loan rate. (6) The 1933 and 1934 Acts swapped. Cure: only the 1934 Act created the SEC. (7) Debt read as free money. Cure: it costs interest every year.

Week 15 — Growing beyond borders

  • The distinction: absolute against comparative advantage. The calculation: opportunity cost, one ratio at a time.
  • Key idea: a country can be better at making everything and still gain by specializing where its opportunity cost is lowest.
  • Definitions: international trade is buying and selling goods and services across national borders; an import is bought from another country and an export is sold to one. Absolute advantage is making more of a good from the same resources. Opportunity cost of A = units of B given up ÷ units of A gained. Comparative advantage is making a good at a lower opportunity cost. Terms of trade are the rate at which partners swap one good for another. The principle is credited to Ricardo (1817), named and never keyed.
  • Barriers to trade: a tariff is a tax on an imported good; a quota limits how much may be imported; an embargo bans trade with a country or in a good. Exchange controls limit buying or selling foreign currency; a non-tariff barrier is any other rule that makes importing harder. The importer of record owes the duty to the United States at the border. How that cost is shared afterward among importers, their buyers, and foreign sellers is an open empirical question, never keyed.
  • Institutions and the trade balance: the World Trade Organization (rules for trade between nations), the International Monetary Fund (stability of the world's money and payments system), and the World Bank (lending to lower-income countries). Two trading blocs are the European Union and the United States-Mexico-Canada Agreement, which entered into force in 2020 and took the place of NAFTA. The trade balance is exports minus imports over a period; a trade deficit measures a year's purchases, not a debt. The 2025 U.S. goods and services deficit was about 900 billion dollars as first reported, and it was later revised.
  • The entry ladder, with risk and control rising together: exporting, licensing, franchising, contract manufacturing, a joint venture, and direct foreign investment. The cart's bottled cold brew sold through a distributor across the border is the first rung.
  • Trade policy as positions: supporters of freer trade cite comparative advantage, lower prices, and bigger markets for exporters; supporters of more protection cite jobs and industries at home, national security, and answering practices they judge unfair. The fact (the importer of record owes the duty) stays apart from the judgment (whether a tariff is wise).
  • Course example: per worker-day, East Island makes 6 fruit or 3 fish and West Island 4 fruit or 1 fish. A fish costs East 6 ÷ 3 = 2 fruit and West 4 ÷ 1 = 4 fruit, so East has the comparative advantage in fish and West in fruit. Trading at 3 fruit per fish, the world goes from 50 fruit and 20 fish to 52 fruit and 24 fish from the same 20 worker-days.
  • The course synthesis: the course's transferable skills are analyzing a case, running the numbers, making a weighed recommendation, and checking AI output. The BLS Occupational Outlook Handbook is where to research a business career.
  • Predictable mistakes → cures: (1) Comparative advantage given to whoever has the absolute advantage. Cure: compare opportunity costs. (2) A ratio turned upside down. Cure: say "fish counted in fruit" or "fruit counted in fish" out loud. (3) A trade deficit read as a debt. Cure: it measures a flow of purchases. (4) "The foreign country pays the tariff". Cure: the importer of record owes it. (5) A tariff read as helping everyone at home. Cure: buyers of the import may pay more. (6) Trade news filed as a strength. Cure: a foreign buyer or a foreign rule sits outside the business.

Representative practice

These are fresh variants, not the final's questions. Work each worked example yourself first, then compare your steps. Every scenario and every number below is illustrative, invented for this guide, and attributed to no one, and every figure was computed and checked in advance.

Worked example — a honey farm reaches more buyers (Week 9)

An illustrative honey farm sells its jars four ways:

  1. At its own roadside stand.
  2. Through a natural-foods grocer, which sells the jars to shoppers.
  3. Through a regional wholesaler, which supplies grocery stores, which sell to shoppers.
  4. Through a broker who lines up gift-basket companies for a commission and never owns the honey.
  • Path 1: a direct channel, with 0 intermediaries.
  • Path 2: an indirect channel with 1 intermediary, a retailer.
  • Path 3: an indirect channel with 2 intermediaries, a wholesaler and then a retailer.
  • Path 4: the broker is an agent, because the broker arranges sales for a fee and never owns the goods.

The promotion budget. The farm plans to sell 6,000 jars at 9 dollars each, and it sets aside 5 percent of planned revenue for promotion. Each jar's honey, glass, and label cost 3 dollars.

  1. Planned revenue: 6,000 × 9 = 54,000 dollars.
  2. Budget: 5 percent is 0.05 when it multiplies, so 0.05 × 54,000 = 2,700 dollars for the year.
  3. Per-unit margin: 9 − 3 = 6 dollars a jar.
  4. Jars to pay for the budget: 2,700 ÷ 6 = 450 jars of per-unit margin.
  5. The wrong-base check: 0.05 × 6,000 = 300 takes 5 percent of the jar count, not of the dollars, so it is not the budget.

The loyalty card. "Buy seven, the eighth is free" means a loyal buyer pays 7 × 9 = 63 dollars for 8 jars. Those 8 jars use 8 × 3 = 24 dollars of honey, glass, and labels. The free eighth jar brings in no revenue, still uses its 3 dollars, and gives up the 9 dollars it would have earned.

One message, and an honest one. The farm's labels, its stand sign, and its social posts all carry the same 9-dollar price and the same promise: honey from its own hives. A draft post that says "nine in ten nutrition experts prefer our honey", when no expert was ever asked, is a made-up statistic the farm may not use. "Bottled within a week of harvest", printed with the harvest date on every jar, is specific, true, and supportable.

In words: the farm spends 2,700 dollars on promotion, which takes the margin from 450 jars to pay for, and its loyalty card costs it 3 dollars of supplies for every free jar.

Why it matters: a channel is counted by the businesses in the middle, and a promotion is a cost the budget must carry.

Worked example — a climbing gym grows to a second site (Week 10)

An illustrative climbing gym is opening a second site. Its general manager sorts the plans:

  • Strategic: open the second site within three years, a decision for the whole business.
  • Tactical: the second site's first season of classes, under a year, for one part of the business.
  • Operational: tomorrow's front-desk schedule.
  • Contingency: what staff do if an automatic belay device stops working mid-climb.

Mission or objective? "Help people of every age climb safely and keep coming back" is a mission statement: what the gym does, for whom, and why. "Sign up 400 new members by the end of next year" is an objective: a specific result by a set time.

Organizing the people. The general manager is over 3 shift leads, and each shift lead is over 3 desk and floor staff.

  1. Headcount: 1 + 3 + 3 × 3 = 1 + 3 + 9 = 13 people.
  2. Each shift team: 1 lead + 3 staff = 4 people, so the teams hold 3 × 4 = 12, and 12 + 1 = 13.
  3. Levels and spans: 3 levels, with a span of control of 3 at each level.

Controlling. The gym's break-even is 13,000 visits a year over 260 open days, so the break-even pace is 13,000 ÷ 260 = 50 visits a day. Each day's count is compared with 50, and a miss sends the manager looking for the cause.

Leading, three ways. An illustrative stage manager calling lighting cues during a live show decides alone: autocratic. An illustrative choir director asks the singers to help pick the spring program: participative. An illustrative research-lab lead lets experienced analysts choose their own methods: free-rein.

Skills by level. A shift lead who resets a jammed belay device uses technical skill. The general manager who judges whether a third site fits the plan uses conceptual skill.

Why it matters: controlling compares a count with a standard set in advance; it is not watching every move.

Worked example — a ski resort hires lift operators (Week 11)

An illustrative ski resort needs seasonal lift operators.

  • Job description: load riders onto the chairs, check that each safety bar is down, and clear snow from the loading ramp.
  • Job specification: able to stand outdoors through long cold shifts, and calm with nervous first-time riders.
  • Recruitment: a booth at an outdoor-gear expo and a post on the resort's own job page build the pool.
  • Selection: an on-slope tryout and a reference check choose from the pool.

The hiring plan. One operator works 30 hours a week for a 20-week season at 17 dollars an hour.

  1. Hours: 30 × 20 = 600 hours.
  2. Season's wages: 600 × 17 = 10,200 dollars.
  3. Above the federal floor, per hour: 17 − 7.25 = 9.75 dollars.
  4. The floor's cost for the same hours: 600 × 7.25 = 4,350 dollars.
  5. Above the floor, for the season: 10,200 − 4,350 = 5,850 dollars.

Points, not percent. In an illustrative industry, the union membership rate fell from 25.0 percent to 15.0 percent.

  • The change: 25.0 − 15.0 = 10.0 percentage points.
  • The percent change: (15.0 − 25.0) ÷ 25.0 × 100 = −40 percent, a fall of four-tenths of the starting rate.

In words: the resort pays 10,200 dollars for one operator's season, 5,850 dollars more than the federal floor alone would require. The law allows that choice but does not require it. Whether to pay more is a judgment, and a state's minimum may be higher.

Why it matters: a statute sets the floor, a percentage point measures a gap between two rates, and recruiting is only the first half of hiring.

Worked example — a zoo diagnoses a keeper's aide (Week 12)

An illustrative zoo pays a keeper's aide 18 dollars an hour for 25 hours a week over 48 weeks. The work area is safe and clean, and the supervisor is fair. The aide never plans anything for the animals, never leads a visitor talk, and hears no thanks.

  1. Hours a year: 25 × 48 = 1,200 hours.
  2. Yearly pay: 1,200 × 18 = 21,600 dollars.
  3. Hygiene factors: fair pay, safe conditions, and fair supervision are met, so the aide is not dissatisfied.
  4. Motivators: responsibility, recognition, and growth are missing.
  5. Diagnosis: hygiene factors met + motivators missing = a motivator gap.
  6. Pricing a raise: each extra dollar an hour costs 1,200 × 1 = 1,200 dollars a year and works on pay, a hygiene factor.
  7. The fix: enrichment. Let the aide design play objects for the otters and lead the morning visitor talk.

Equity theory. Two illustrative security guards at two office towers each earn 22 dollars an hour for 30 hours a week. Each earns 22 × 30 = 660 dollars a week, and each outcome-to-input ratio is 660 ÷ 30 = 22 dollars an hour, so the ratios match.

Goal-setting. "Check all 18 enclosure locks before the gates open" is a specific, hard goal; "do your best on the locks" is not.

Job design. Adding the gift-shop restocking to the aide's job is enlargement. Letting the aide plan the otters' daily routine is enrichment. Moving the aide among the reptile house, the aviary, and the barn on a schedule is rotation.

Why it matters: a raise costs real money every year, and it works on the wrong factor when the gap is in the work itself.

Worked example — a soap maker's first year (Week 13)

An illustrative soap maker opens with 4,000 dollars of cash, 2,000 dollars of inventory, and 14,000 dollars of equipment. It borrowed 10,000 dollars at 8 percent, and the owner put in 10,000 dollars.

Opening-day balance sheet (as of opening day):

  • Assets: 4,000 + 2,000 + 14,000 = 20,000 dollars.
  • Claims: loan 10,000 + owner's equity 10,000 = 20,000 dollars, so 20,000 = 20,000.

Income statement (for the year ended on its first anniversary):

Illustrative soap maker's income statement for its first year, in dollars, from revenue down to net income
Line Dollars How it is found
Revenue 40,000 8,000 bars × 5 dollars
Cost of goods sold 8,000 8,000 bars × 1 dollar
Gross profit 32,000 40,000 − 8,000
Operating expenses 24,000 rent 9,000 + wages 12,000 + promotion 1,000 + depreciation 2,000
Operating income 8,000 32,000 − 24,000
Interest expense 800 10,000 × 0.08
Net income 7,200 8,000 − 800

In words: the soap maker earned 7,200 dollars of net income on 40,000 dollars of sales.

The break-even check. Fixed costs are 24,000 + 800 = 24,800 dollars, and each bar contributes 5 − 1 = 4 dollars. Break-even = 24,800 ÷ 4 = 6,200 bars. The 8,000 − 6,200 = 1,800 bars past break-even bring in 1,800 × 4 = 7,200 dollars, the same net income.

Year-end balance sheet (as of the first anniversary). During the year the owner withdrew 2,200 dollars, the maker repaid 2,000 dollars of the loan, and it owes suppliers 1,000 dollars.

  • Assets: cash 10,000 + inventory 2,000 + equipment (14,000 − 2,000 = 12,000) = 24,000 dollars.
  • Liabilities: accounts payable 1,000 + loan (10,000 − 2,000 = 8,000, with 2,000 due within the year) = 9,000 dollars.
  • Owner's equity: 10,000 + 7,200 − 2,200 = 15,000 dollars.
  • The balance check: 9,000 + 15,000 = 24,000, equal to total assets.

Statement of cash flows (for the year):

  • Operating: 7,200 + 2,000 of depreciation + 1,000 more owed to suppliers = 10,200 dollars.
  • Investing: 0 dollars.
  • Financing: (2,000) loan repaid + (2,200) withdrawn = (4,200) dollars.
  • Net change in cash: 10,200 − 4,200 = 6,000 dollars, so cash went from 4,000 to 10,000.
  • Profit against cash: 7,200 − 6,000 = 1,200 dollars between net income and the rise in cash.

The ratios:

  1. Current ratio: (10,000 + 2,000) ÷ (1,000 + 2,000) = 12,000 ÷ 3,000 = 4.0, so the maker holds 4 dollars of near-term assets for each dollar due within the year.
  2. Debt-to-equity: 9,000 ÷ 15,000 = 0.6, so it owes 60 cents for each dollar of the owner's claim.
  3. Gross margin: 32,000 ÷ 40,000 × 100 = 80 percent.
  4. Net profit margin: 7,200 ÷ 40,000 × 100 = 18 percent, so 18 cents of each sales dollar is left as profit.
  5. The flipped-ratio check: 3,000 ÷ 12,000 = 0.25 puts current liabilities on top, so it is not the current ratio.
  6. Gross margin against markup: on one bar, markup on cost = (5 − 1) ÷ 1 × 100 = 400 percent, while the gross margin divides by revenue and stays at 80 percent.

Why it matters: the withdrawal lowered equity and cash but never touched net income, and each ratio names the two lines it divides.

Worked example — a dance studio pays for a second room (Week 14)

An illustrative dance studio wants a second studio room that costs 25,000 dollars. It holds 15,000 dollars of cash, total liabilities of 10,000 dollars, and owner's equity of 25,000 dollars. It earned 12,000 dollars of net income last year.

Money's three jobs at the studio. Parents pay class fees in dollars: medium of exchange. The studio compares 96 dollars for 8 classes, 96 ÷ 8 = 12 dollars a class, with 60 dollars for 4 classes, 60 ÷ 4 = 15 dollars a class: unit of account. The owner sets aside 500 dollars a month for 6 months, 500 × 6 = 3,000 dollars, for new mirrors: store of value.

The financing choice:

  1. The gap: 25,000 − 15,000 = 10,000 dollars of the price is more than the studio holds in cash.
  2. Debt, the interest: a loan of 25,000 dollars at 9 percent costs 25,000 × 0.09 = 2,250 dollars a year, owed whether or not the new room fills.
  3. Debt, the ownership: the owner keeps 100 percent.
  4. Debt-to-equity now: 10,000 ÷ 25,000 = 0.4.
  5. Debt-to-equity with the loan: (10,000 + 25,000) ÷ 25,000 = 35,000 ÷ 25,000 = 1.4.
  6. Equity, the ownership: selling a 20 percent share for 25,000 dollars leaves the owner 100 − 20 = 80 percent, with no interest and no repayment schedule.
  7. Debt-to-equity with the investor: 10,000 ÷ (25,000 + 25,000) = 10,000 ÷ 50,000 = 0.2.

In words: the loan keeps the owner at 100 percent but adds 2,250 dollars of interest a year and lifts debt-to-equity to 1.4. The investor adds no interest and lowers debt-to-equity to 0.2, but takes 20 percent of every future profit. Both sets of numbers are facts; which one fits is a judgment, and none of this is investment advice.

Deposit insurance. The owner keeps 330,000 dollars of personal savings, all in the owner's name alone, at one insured bank. The FDIC covers 250,000 of it, so 330,000 − 250,000 = 80,000 dollars sits beyond the cover. A mutual fund the owner bought through the same bank is not a deposit, so it is not covered at all.

Stocks, bonds, and the two markets. An illustrative sporting-goods corporation sells new stock to raise equity; its stockholders are owners, and its board decides whether to pay a dividend. An illustrative port authority sells new bonds to rebuild a pier: that sale is in the primary market, and bondholders are creditors. When one investor later sells those bonds to another, the trade is in the secondary market, and the port authority receives nothing.

Why it matters: debt costs interest every year, equity costs a share of ownership forever, and the FDIC counts per depositor, per insured bank, for each account ownership category.

Worked example — two regions, two goods (Week 15)

Two illustrative regions make hats and shirts. In one worker-day, Highland makes 12 hats or 3 shirts, and Lowland makes 10 hats or 1 shirt.

  1. Absolute advantage: Highland makes more of both, 12 hats against 10 and 3 shirts against 1.
  2. A shirt's opportunity cost: Highland 12 ÷ 3 = 4 hats; Lowland 10 ÷ 1 = 10 hats. Highland has the comparative advantage in shirts.
  3. A hat's opportunity cost: Highland 3 ÷ 12 = 0.25 shirt; Lowland 1 ÷ 10 = 0.1 shirt. Lowland has the comparative advantage in hats.
  4. Terms that help both: between 4 and 10 hats per shirt. This example uses 6.
  5. Before trade, 5 days on each good: Highland 5 × 12 = 60 hats and 5 × 3 = 15 shirts; Lowland 5 × 10 = 50 hats and 5 × 1 = 5 shirts. The world has 110 hats and 20 shirts.
  6. Specializing: Highland puts 8 days on shirts and 2 on hats, 8 × 3 = 24 shirts and 2 × 12 = 24 hats. Lowland puts all 10 days on hats, 10 × 10 = 100 hats.
  7. The trade: Highland sends 6 shirts and receives 6 × 6 = 36 hats.
  8. After trade: Highland has 24 + 36 = 60 hats and 24 − 6 = 18 shirts; Lowland has 100 − 36 = 64 hats and 6 shirts.
  9. The world after trade: 60 + 64 = 124 hats and 18 + 6 = 24 shirts, from the same 20 worker-days.

In words: Highland is better at both goods, yet both regions end with more. Highland keeps its 60 hats and gains 3 shirts, and Lowland gains 14 hats and 1 shirt.

The tariff at the border. An illustrative music store imports 6,000 dollars of guitars that carry a 5 percent tariff. As the importer of record, the store owes 6,000 × 0.05 = 300 dollars at the border. Who bears that cost afterward is an open question the course does not key.

The entry ladder. An illustrative skateboard maker first exports boards through a distributor abroad, with little money at risk and little control. Licensing its deck designs to a foreign maker for a fee is the next rung. Franchising skate shops, contract manufacturing, and a joint venture follow, and owning a factory abroad is the top rung.

Trade news in a SWOT. A country the maker sells to sets a quota on imported skateboards. That rule sits outside the maker and could hurt it, so it is a threat. In a PESTEL scan it belongs under the political or legal forces.

Why it matters: comparative advantage follows the lower opportunity cost, not the bigger output.

Worked example — one business across the course (Weeks 6, 7, 10, and 13)

An illustrative tea kiosk shows how the course's tools chain together.

  1. Capacity (Week 6): taking an order takes 1 minute and brewing takes 3 minutes on the one brewer, so brewing is the bottleneck and capacity is 60 ÷ 3 = 20 cups an hour.
  2. Break-even (Week 7): the price is 4 dollars, the variable cost is 1 dollar, and fixed costs are 24,000 dollars a year. Break-even = 24,000 ÷ (4 − 1) = 8,000 cups a year.
  3. The pace (Week 10): over 250 open days, the standard is 8,000 ÷ 250 = 32 cups a day.
  4. Can it reach the pace? 32 ÷ 20 = 1.6 hours of full-speed brewing a day, so capacity is not the limit; demand is.
  5. Profit (Week 13): if the kiosk sells 10,000 cups, the 10,000 − 8,000 = 2,000 cups past break-even bring in 2,000 × 3 = 6,000 dollars of profit.

Why it matters: the final asks for one tool at a time, but each tool reads numbers the earlier ones produced.

Self-check questions

Try each one, then read the check and the one-line why.

  1. An illustrative furniture maker pays a broker a commission to arrange sales of its sofas to hotel groups, and the broker never owns a sofa. What kind of intermediary is the broker? Check: an agent. Why: an agent arranges sales for a fee without owning the goods.
  2. An illustrative roller rink hands each skater a coupon for a free snack on the next visit. Which part of the promotional mix is that? Check: sales promotion. Why: it is a short-term reward that nudges a buyer to come back.
  3. At an illustrative parking garage, the manager checks the daily car count against a target of 400 and looks for the cause of any miss. Which management function is that? Check: controlling. Why: it sets a standard, measures, compares, and corrects.
  4. An illustrative ice-cream maker plans which flavors to sell this summer. Which type of planning is it? Check: tactical. Why: it covers under a year for one part of the business.
  5. A union files a formal complaint that management broke the contract's overtime rule. What is that complaint called? Check: a grievance. Why: it is a formal complaint that the contract has been broken.
  6. Which statute protects workers aged 40 and older, and in what year did it pass? Check: the Age Discrimination in Employment Act (1967). Why: the course names it with its year.
  7. An illustrative grocery store adds shelf restocking to a cashier's job, with no new responsibility. Which job-design tool is that? Check: job enlargement. Why: it adds more tasks at the same level.
  8. A manager assumes that the staff will seek responsibility and direct themselves toward goals they care about. Which of McGregor's two sets of assumptions is that? Check: Theory Y. Why: it describes the manager's assumptions, not a type of worker.
  9. Which of the three statements are headed "for the year ended" a date? Check: the income statement and the statement of cash flows. Why: each covers a span of time; the balance sheet is "as of" one date.
  10. An illustrative printing shop owes 7,000 dollars in all, and its owner's claim is 20,000 dollars. What is its debt-to-equity? Check: 7,000 ÷ 20,000 = 0.35. Why: it owes 35 cents for each dollar of the owner's claim.
  11. A financial institution takes deposits and makes loans and is owned by its members as a cooperative. What is it? Check: a credit union. Why: member ownership is what sets it apart from a commercial bank.
  12. An investor buys existing shares of a company from another investor. Which market is that, and does the company receive the money? Check: the secondary market; the company receives nothing. Why: only a sale of new securities is in the primary market.
  13. A government limits how many tons of imported sugar may enter in a year. Which barrier to trade is that? Check: a quota. Why: a quota limits an amount; a tariff is a tax.
  14. An illustrative country imports goods worth 150 and exports goods worth 120, in millions of dollars. What is its trade balance, and is it a debt? Check: 120 − 150 = −30, a deficit of 30 million dollars; it is not a debt. Why: the balance measures a year's flow of purchases.

Check yourself — choose one. Write two or three sentences to a friend.

  • (a) Explain why a business can earn a profit for the year and still end the year short of cash.
  • (b) Explain why a region that is better at making both goods can still gain from trade.

Either one rehearses an explain-why skill the final checks.

Watch before the exam

These twelve videos come from the course's vetted Week 16 pool, and every one has captions. Use them to review and to connect weeks, not to learn anything new.

Study plan

A short countdown. Count back from the day you plan to sit the final.

  • Three weeks out: as you finish Week 13, start a one-page list of the second half's swapped pairs. Begin with a wholesaler and a retailer, management and leadership, recruitment and selection, hygiene factors and motivators, and profit and cash. Add debt and equity, stocks and bonds, and absolute and comparative advantage as Weeks 14 and 15 arrive.
  • Two weeks out: as you finish Week 14, reread the topic reviews above for Weeks 9 and 10. They are further back, and together with Week 13 they hold 19 of the final's 40 questions.
  • One week out: as you finish Week 15, take the practice exam once, cold and closed-note. Note which weeks cost you the most, and remember that it reaches back to Weeks 1 to 7 while the final draws only from Weeks 9 to 15.
  • Three or four days before you sit it: reread the topic reviews for your two weakest weeks, and redo the matching worked examples from scratch without looking. Write every calculation one step per line and end it with a sentence in words.
  • Two days before: run the paired exam-prep tutorial (the copy-and-paste chatbot tutor, or its no-AI route) for active recall. Tell it which areas the practice exam exposed, and ask it to drill Week 13 and Week 15.
  • The day before: retake the practice exam, explain every miss out loud, and work the self-check questions above.
  • Right before: skim the "predictable mistakes → cures" lines for Weeks 9 to 15. Then stop studying; a few slow breaths and a look at your one-page list are enough.

This guide is for review. The exam-prep tutorial and the practice exam are where you rehearse. Pulling ideas back out of memory, not rereading, is what makes them stick.

Exam format

Every one of the 40 questions counts the same, and the final checks your own understanding without AI. The questions come one at a time, and there is no going back, so settle each one before you move on. After you submit, Canvas shows your result.

Test-taking strategies for this material:

  • Name the pair before you choose. Most questions turn on two neighboring ideas, such as recruitment and selection, or debt and equity. Say which pair is in play first.
  • Ask the one-line test. Who owns the goods in the middle? Is this planning, organizing, leading, or controlling? Is it building the pool, or picking from it? Is it pay or the work itself? As of a date, or for a span? A loan or a share? Which opportunity cost is lower?
  • For a calculation, write the formula first, then each step on its own line, then the number in words. For a ratio, name the two lines before you divide, and check which one goes on top.
  • For an income statement, walk the lines in order: revenue, cost of goods sold, gross profit, operating expenses, operating income, interest, net income. Anything an owner takes out stays off the list.
  • For an opportunity cost, say the units out loud: "hats given up per shirt gained". That one sentence keeps the ratio from turning upside down.
  • Treat "illustrative" as a cue. The business was invented for the question, so judge it by the course's definitions, not by what you guess about real firms.
  • For a true-or-false statement, test every part. One wrong word, such as "every", "never", or "required", makes the whole statement false.

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