Chapter 14: Social Enterprise and Earned Income

Test Bank

Multiple Choice

1. What is the income a nonprofit organization receives from fees for service called?

A. earned

B. taxable

C. contributed

D. expendable

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Chapter Introduction

Difficulty Level: Easy

2. According to Wei-Skillern, a small level of earned income is considered as ______.

A. integral

B. sustaining

C. disposable

D. supplementary

Learning Objective: 14-2: Explain questions that nonprofits should consider in evaluating earned-income opportunities.

Cognitive Domain: Knowledge

Answer Location: Why Earned Income?

Difficulty Level: Easy

3. ______ supported the renovation of the Statue of Liberty by contributing a penny to the campaign each time a consumer used the company’s credit card.

A. Visa

B. Discover

C. Mastercard

D. American Express

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Partnerships With Business

Discovery Level: Easy

4. What is a contract that permits a for-profit company to use the nonprofit’s logo in return for a royalty called?

A. partnership

B. gift-in-kind

C. copyright agreement

D. licensing agreement

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Licensing

Difficulty Level: Easy

5. In a ______ relationship, a for-profit company pays to have its name placed on a nonprofit’s products.

A. sponsorship

B. joint venture

C. licensing agreement

D. corporate agreement

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Sponsorships

Difficulty Level: Easy

6. Corporate sponsorships offer nonprofit organizations the benefits of added revenue and ______ through the company’s promotion of the relationship.

A. increased respect

B. corporate freebies

C. increased visibility

D. improved recruiting

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Sponsorships

Difficulty Level: Easy

7. In what type of partnership does a for-profit company contribute a fixed contribution to a nonprofit organization in connection with a short-term promotion?

A. joint venture

B. cause marketing

C. corporate partnership

D. promotion-based venture

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Cause Marketing

Difficulty Level: Easy

8. The term “social enterprise” can be used to describe both organizations and ______.

A. goals

B. values

C. activities

D. movements

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Chapter Introduction

Difficulty Level: Easy

9. What term describes for-profit companies that engage in cause marketing?

A. partners

B. promoters

C. creative marketers

D. commercial co-venturers

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Cause Marketing

Difficulty Level: Easy

10. A nonprofit organization agreed to allow a for-profit corporation to use the nonprofit’s logo on advertising to enhance the corporation’s image. This agreement is an example of exchanging ______.

A. tactibles

B. inventories

C. intangibles

D. physical assets

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Operational Relationships

Difficulty Level: Easy

11. In a ______ relationship, nonprofits provide services for business corporations that need to achieve social benefits that are not within their budgets.

A. enterprise

B. operational

C. joint venture

D. social enterprise

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Comprehension

Answer Location: Operational Relationships

Difficulty Level: Medium

12. New initiatives undertaken by two entities that involve the creation of a new entity owned by both partners are called ______.

A. joint ventures

B. nonprofit enterprises

C. corporate partnerships

D. nonprofit business ventures

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Operational Relationships

Difficulty Level: Easy

13. A nonprofit organization seeking a business sponsor needs to consider the company’s ______.

A. interests and goals

B. financial portfolio

C. employee benefits package

D. popularity among the staff and volunteers

Learning Objective: 14-2: Explain questions that nonprofits should consider in evaluating earned-income opportunities.

Cognitive Domain: Knowledge

Answer Location: Putting Partnerships Together

Difficulty Level: Easy

14. A nonprofit organization considering selling a product is evaluating the competitive marketplace. This action is an example of exploring the product’s ______ environment.

A. joint

B. internal

C. external

D. feasibility

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Comprehension

Answer Location: Feasibility Analysis and Business Planning

Difficulty Level: Medium

15. A detailed, comprehensive document that encompasses an organization’s strategic, marketing, business, and operational plans is called a ______.

A. market plan

B. business plan

C. feasibility analysis

D. sensitivity analysis

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Knowledge

Answer Location: Feasibility Analysis and Business Planning

Difficulty Level: Easy

16. A nonprofit board of directors is analyzing a feasibility study to determine if there is a community need for a new service. The board is looking at which part of the business plan?

A. description

B. market analysis

C. financial assumptions

D. uncertainties and risks

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Comprehension

Answer Location: Feasibility Analysis and Business Planning

Difficulty Level: Medium

17. Which part of a business plan provides a succinct overview of the plan’s major points?

A. executive summary

B. strategies for growth

C. financial assumptions

D. uncertainties and risks

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Comprehension

Answer Location: Feasibility Analysis and Business Planning

Difficulty Level: Medium

18. According to Young, a business venture is worth pursuing if it ______.

A. supports the mission

B. offers a potential to break even

C. helps build a body of political support

D. just a few organizational members oppose the venture

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Knowledge

Answer Location: Evaluating Opportunities Against Mission

Difficulty Level: Easy

19. Careful business plans include a/an ______ analysis projecting if assumptions will be wrong by some percentage.

A. market

B. earnings

C. sensitivity

D. feasibility

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Knowledge

Answer Location: Feasibility Analysis and Business Planning

Difficulty Level: Easy

20. How would Wei-Skillern categorize mission-related earned income that a nonprofit organization is very dependent on?

A. integral

B. disposable

C. sustaining

D. supplementary

Learning Objective: 14-2: Explain questions that nonprofits should consider in evaluating earned-income opportunities.

Cognitive Domain: Knowledge

Answer Location: Why Earned Income?

Difficulty Level: Easy

21. Economist Burton Weisbrod wrote in the Stanford Social Innovation Review that Congress should ______.

A. decrease tax incentives to be charitable

B. decrease tax incentives for philanthropy

C. discourage nonprofits from undertaking business ventures

D. discourage the for-profit sector from participating in nonprofit partnerships

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Knowledge

Answer Location: A Continuing Debate

Difficulty Level: Easy

22. The executive director of the Global Good Fund argues that relying on earned income makes an organization ______.

A. prone to risk

B. more flexible

C. open to opportunity

B. unattractive to corporate partners

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Knowledge

Answer Location: A Continuing Debate

Difficulty Level: Easy

23. Ultimately, who is responsible for making the decision if a nonprofit organization should enter into a business partnership?

A. banks

B. board of directors

C. chief executive officer

D. Internal Revenue Service

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Knowledge

Answer Location: A Continuing Debate

Difficulty Level: Easy

24. Nonprofit business ventures may also be referred to as ______ by some people.

A. tax shelters

B. social enterprise

C. advocacy ventures

D. lobbying initiatives

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Chapter Introduction

Difficulty Level: Easy

25. Nonprofits begin to identify business opportunities by surveying the business’s ______.

A. risks

B. assets

C. members

D. opportunities

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Knowledge

Answer Location: Identifying Business Opportunities

Difficulty Level: Easy

26. Financial donations to nonprofit organizations are referred to as ______ income.

A. contributed

B. banked

C. in-kind

D. investment

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Chapter Introduction

Difficulty Level: Easy

27. Weisbrod calls the “growth of earned income” as the ______ of the nonprofit sector.

A. state transformation

B. corporate intervention

C. federal transformation

D. commercial transformation

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Earned-Income Strategies: Issues and Decisions

Difficulty Level: Easy

28. Wei-Skillern labels small amounts of earned income that are not directly related to a nonprofit’s mission as ______.

A. integral

B. sustaining

C. disposable

D. supplemental

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Why Earned Income?

Difficulty Level: Easy

29. What type of gift is a company’s financial donation to a nonprofit organization without expectation of a benefit beyond that of social responsibility?

A. charity

B. gift-in-kind

C. philanthropic

D. earned income

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Partnerships With Business

Difficulty Level: Easy

30. Which type of relationship is not a nonprofit–corporate relationship?

A. lobbying

B. sponsorship

C. cause-marketing

D. licensing agreement

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Partnerships With Business

Difficulty Level: Easy

True/False

1. Nonprofit organizations earn most of their revenue from earned income.

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Chapter Introduction

Difficulty Level: Easy

2. Earned income is derived from donor contributions.

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Why Earned Income?

Difficulty Level: Easy

3. The three sources of a balanced portfolio are earned income, philanthropy, and government sources.

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Chapter Summary

Difficulty Level: Easy

4. The Social Enterprise Alliance defines a social enterprise as a social opportunity.

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Defining Social Enterprise and Earned Income

Difficulty Level: Easy

5. Three principal activities of nonprofit business ventures are services, manufacturing, and distribution.

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Knowledge

Answer Location: Nonprofit Business Ventures

Difficulty Level: Easy

6. Examples of nonprofit business ventures are the retail stores operated by the Salvation Army.

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Knowledge

Answer Location: Nonprofit Business Ventures

Difficulty Level: Easy

7. Earning income from commercial ventures is easier than earning income from donations.

Learning Objective: 14-2: Explain questions that nonprofits should consider in evaluating earned-income opportunities.

Cognitive Domain: Knowledge

Answer Location: Nonprofit Business Ventures

Difficulty Level: Easy

8. One step involved when creating a nonprofit business venture is to conduct a feasibility analysis.

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Knowledge

Answer Location: Feasibility Analysis and Business Planning

Difficulty Level: Easy

9. A business plan is a document used for internal and external purposes.

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Knowledge

Answer Location: Feasibility Analysis and Business Planning

Difficulty Level: Easy

10. One concern about earned-income strategies is they place limits on transparency due to contractual agreements.

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Knowledge

Answer Location: Sorting Out the Issues

Difficulty Level: Easy

11. Earned-income strategies may negatively impact the public’s perception of a nonprofit organization.

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Knowledge

Answer Location: Sorting Out the Issues

Difficulty Level: Easy

Short Answer

1. Explain why nonprofit organizations are becoming more interested in pursuing earned income through partnerships with businesses.

Learning Objective: 14-2: Explain questions that nonprofits should consider in evaluating earned-income opportunities.

Cognitive Domain: Comprehension

Answer Location: Why Earned Income?

Difficulty Level: Medium

2. Investigate and justify why some licensing agreements can be controversial.

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Analysis

Answer Location: Licensing

Difficulty Level: Hard

3. Compare and contrast the terms “sponsorships” and “advertising.”

Learning Objective 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Analysis

Answer Location: Partnerships With Business

Difficulty Level: Hard

4. Identify and explain the benefits to the nonprofit of a cause–marketing relationship.

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Comprehension

Answer Location: Cause Marketing

Difficulty Level: Medium

5. Examine and explain Standard 19 of the Better Business Bureau Wise Giving Alliance Standards of Excellence.

Learning Objective: 14-3: Describe common types of partnerships between nonprofit organizations and business firms.

Cognitive Domain: Comprehension

Answer Location: Cause Marketing

Difficulty Level: Medium

6. Identify and explain the risks and benefits of a joint venture for a nonprofit organization.

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Analysis

Answer Location: Operational Relationships

Difficulty Level: Hard

7. Evaluate Sagawa and Segal’s five obstacles to successful partnerships. Justify if you agree or disagree with Sagawa and Segal.

Learning Objective: 14-5: Evaluate the potential risks and rewards of earned-income strategies.

Cognitive Domain: Analysis

Answer Location: Putting Partnerships Together

Difficulty Level: Hard

8. Identify the three principal business activities nonprofit organizations engages in. Provide an example of each.

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Comprehension

Answer Location: Nonprofit Business Ventures

Difficulty Level: Medium

9. Identify and explain three concerns about earned-income strategies a nonprofit should explore.

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Comprehension

Answer Location: Nonprofit Business Ventures

Difficulty Level: Medium

10. Identify and explain three fundamental questions nonprofit organizations need to answer before starting a business venture.

Learning Objective: 14-4: Explain the process for identifying and developing nonprofit earned-income ventures.

Cognitive Domain: Comprehension

Answer Location: Identifying Business Opportunities

Difficulty Level: Medium

11. Explain why it is difficult to define the term “social enterprise.”

Learning Objective: 14-1: Define key terms and concepts related to social enterprise and nonprofit earned income.

Cognitive Domain: Comprehension

Answer Location: Chapter Introduction

Difficulty Level: Medium