Chapter 1: Engineering and Business

Question 1

Proprietership

Answer 1

A business owned by an individual

Question 2

Advantages of proprietorship (4)

Answer 2

owner enjoys all profits,
make own decisions,
formed easily and
inexpensively,
taxed at the owner’s personal tax rate

Question 3

Disadvantages of proprietorship (3)

Answer 3

personal liability,
life of owner,
cannot issue stocks & bonds
(business expansion)

Question 4

Partnership

Answer 4

Buisiness with more than one owner

Question 5

Advantages of partnership (3)

Answer 5

more operating capital,
more balanced management,
easy to borrow money from a bank

Question 6

Disadvantages of partnership (2)

Answer 6

personal liability for partner,
bond by each other’s
commitments

Question 7

Corporation

Answer 7

Legal entity created under provincial or federal law.

Question 8

Advantages of corporation (3)

Answer 8

raise capital by issuing stocks and bonds,
easy transfer of ownership by trading shares of stock,
limited personal liability

Question 9

Disadvantages of corporation (3)

Answer 9

legal restriction on operations,
complex taxation,
management must meet stockholder expectation.

Question 10

Shareholders

Answer 10

Owners that provide money to run an organization

Question 11

Board of directors & chair of the board

Answer 11

Elected by the
owners (shareholders) to run the corporation

Question 12

Chief executive officer

Answer 12

most senior officer of the
corporation, responsible for operations, finances, and
strategy, reports to Board

Question 13

President

Answer 13

responsible for operation of entire organization

Question 14

Executives

Answer 14

responsible for different parts of the organization.

Question 15

Managers

Answer 15

responsible for line operations

Question 16

Staff

Answer 16

Workers that work

Question 17

What do engineers do in business?

Answer 17

plan for capital expenditures

Question 18

4 fundemental principles of business management

Answer 18

1. Time
2. Difference
3. increment
4. Risk

Question 19

Fundamental principle 1: Time

Answer 19

A nearby penny is worth a distant dollar. Money has a time value associated with it
because we can earn interest on money invested today.

Question 20

Fundamental principle 2: Difference

Answer 20

All that counts are the differences among alternatives. Whatever you decide, you need to spend the same amount of money
on fuel and maintenance.

Question 21

Fundamental principle 3: Increment

Answer 21

Marginal revenue must exceed marginal cost. To justify your action, marginal revenue must exceed marginal cost

Question 22

Fundamental Principle 4: Risk

Answer 22

Additional risk is not taken without the expected
additional return. Invested money can render higher profits only if it is subject to the possibility of being lost.