Future Business Leaders of America (FBLA) Accounting Practice Test

What defines a merchandising business?

1. A business that provides services rather than goods

2. A business that produces goods for sale

3. A business that buys goods to sell for profit

4. A business focused on online sales only

The correct answer is: A business that buys goods to sell for profit

A merchandising business is defined by its primary operation of purchasing finished goods with the intention of reselling them to consumers for profit. These businesses do not create the products themselves; instead, they play the role of intermediaries in the distribution chain. By acquiring goods from manufacturers or wholesalers and then selling them at a markup, merchandising businesses can generate income. The concept encapsulates a wide range of enterprises, from retail stores to online merchants, all of which rely on buying inventory to sell to their customers. This model differentiates merchandising businesses from service-oriented businesses, which provide services rather than tangible products. It also sets them apart from manufacturing businesses, which create goods for sale. The characteristic of being focused solely on online sales is not a defining trait of merchandising businesses, as these can operate in a variety of formats, including brick-and-mortar stores and hybrid models. This broad scope makes the definition of a merchandising business inclusive of any entity that follows the buying-for-resale approach.