Deck 5: Entrepreneurs and Small Businesses

Question 1

A(n)________ is defined as a business that is independently owned and operated and is not dominant in its field of operations.

A)incubating business
B)small business
C)noncompetitive business
D)minority-owned business

Answer 1

B

Question 2

Small businesses are important to the economy because ________.

A)they are more innovative than larger companies
B)they improve productivity by hiring less-expensive staff in countries outside the United States
C)they employ approximately 50 percent of the private workforce in the United States
D)they produce annual revenues equal to the economy of the European Union

Answer 2

C

Question 3

Which of the following statements is FALSE about the kind of workers that small businesses employ?

A)Small businesses employ a larger proportion of younger workers than larger firms.
B)Small businesses employ a larger proportion of foreign nationals than larger firms.
C)Small businesses employ a smaller proportion of part-time workers than larger firms.
D)Small businesses employ a growing percentage of minorities and women.

Answer 3

C

Question 4

A(n)________ is a type of entrepreneur who prefers to keep his or her business small.

A)intrapreneur
B)minipreneur
C)nanopreneur
D)micropreneur

Question 5

Maggie wants to start a fine dining restaurant in her town and dreams someday of having a chain of restaurants all over the country. She can be considered a growth entrepreneur because she ________.

A)hopes that her restaurant will attract customers
B)believes that revenues from her restaurant will grow rapidly
C)plans to have her business expand beyond her local area
D)understands that there is an increasingly large market for dining experiences

Question 6

Marge designs an innovative and fashionable laptop bag, but feels she lacks experience to turn her creation into a viable business. Marge's BEST option is to ________.

A)license the idea for selling an innovative bag to someone else
B)recognize that she lacks the business savvy to start a business
C)put together an entrepreneurial team to market the bag
D)overcome her doubts and try to market the bag herself

Question 7

Which statement BEST describes why a successful entrepreneur needs to be flexible?

A)Starting a new business often leads to envy in the wider business community.
B)People with whom entrepreneurs work are often opinionated and rigid.
C)Entrepreneurial ventures involve risky situations and unexpected events.
D)Initial business revenues tend to be low and may remain low for several years.

Question 8

Amy is the founder of a small IT firm that specializes in social networking applications. She meets weekly with the members of her development team to solicit their ideas, address any problems they are having, and provide motivation and encouragement. Amy is demonstrating which characteristic of a successful entrepreneur?

A)risk-taking and financial thinking
B)leadership and communication skills
C)introversion and intellectual capacity
D)technical skills and expertise

Question 9

An entrepreneurial team is ________.

A)a group of individuals with varied experiences and skills that come together to form a new venture
B)a strategic alliance among two or more companies who collaborate to launch a new product
C)a group of individuals who come together to discuss their feelings about working for their employer
D)a group of individuals who meet regularly to provide mutual support to group members

Question 10

Which of the following is LEAST likely to be a characteristic of successful entrepreneurs?

A)likes to take risks
B)motivated to succeed
C)prefers not to work around other people
D)prefers not to work for other people

Question 11

Which of the following is the BEST example of entrepreneurial innovation?

A)launching the first Starbucks store
B)opening a new landscaping business
C)buying a McDonald's franchise
D)providing financing for a startup business

Question 12

Which of the following types of entrepreneurs does NOT become involved in starting his or her own business?

A)growth entrepreneur
B)intrapreneur
C)quasipreneur
D)contract entrepreneur

Question 13

James lives near a university and observes that almost every student uses a cell phone. He decides to open a small shop offering repair services for cell phones. His shop is an instant success. James has satisfied an area of need called ________.

A)the marketplace
B)fertile ground
C)an unconscious demand
D)an opportunity niche

Question 14

A(n)________ is someone who takes the risk of creating, organizing and operating a business, usually to satisfy an unmet need in the marketplace.

A)business owner
B)entrepreneur
C)venture capitalist
D)innovator

Question 15

Lifestyle entrepreneurs ________.

A)create upscale products and services that appeal to affluent customers
B)want flexibility and freedom in the way they balance their personal and work lives
C)create programs that help people live in a more environmentally responsible manner
D)anticipate and take advantage of upcoming trends in fashion and home design

Question 16

Which of the following is an example of the role that small businesses can play in fostering innovation?

A)Dell Computer's sale of computers directly to consumers
B)Hewlett-Packard's sale of computers to small retail establishments
C)Intel's invention of the Pentium processor
D)Sony's invention of the PlayStation video game device

Question 17

A ________ business is one that has at least 20 percent sales growth per year for five years, starting with a base of at least $100,000.

A)cheetah
B)hyper-growth
C)consistent-growth
D)gazelle

Question 18

Before Fred started a new business venture, he weighed the factors that could help him succeed as well as the difficulties or setbacks he might face. Which characteristic of a successful entrepreneur is Fred demonstrating?

A)systems thinking
B)motivation
C)discomfort with uncertainty
D)calculated risk taking

Question 19

Which of the following BEST explains why small businesses can be so effective in fostering innovation?

A)SBA's venture capital program provides funding needed for rapid new product development.
B)Entrepreneurs typically prefer to work in small businesses rather than large ones.
C)Employees of small businesses tend to be more creative than those of large businesses.
D)Small business' flexibility allows them to react quickly to changing market needs and trends.

Question 20

Kyle is an entrepreneur who runs his own advertising agency. He can see the whole picture of what is involved in growing his company, and he has developed a solid plan for every aspect of the business, including production, financing, and marketing. This approach to his business indicates that Kyle is a ________.

A)system thinker
B)holistic owner
C)visionary
D)producer

Question 21

Which of the following is NOT an advantage of buying an existing business?

A)It is simpler than beginning a new business from scratch.
B)There is a reduction in startup time and energy.
C)An existing business has less competition.
D)An existing business has an existing customer base.

Question 22

All of the following are reasons why people start small businesses EXCEPT ________.

A)financial independence
B)reduced levels of responsibility
C)more control of business decisions
D)lack of other employment opportunities

Question 23

Peter has applied for a loan to purchase a franchise of a popular convenience store in an area that is experiencing rapid population growth. If the loan is approved, it will MOST likely be because ________.

A)there is less risk associated with a franchise than with an independent business startup
B)the franchise company will provide the financing
C)the population growth justifies the market need for the store
D)the franchise company will prevent other franchisees from operating in the same area

Question 24

Regardless of how well or poorly a franchise business is doing, franchisees must give the franchiser a monthly ________.

A)financial statement
B)marketing plan
C)royalty fee
D)inventory report

Question 25

Which of the following is NOT a disadvantage of franchising?

A)lack of control
B)work load
C)competition
D)brand recognition

Question 26

Ever since Kim opened her own nail salon, she has made all important decisions about how it is run. She recently launched a Web site to market her services and a new line of organic nail products. Which reason for starting a small business is BEST displayed by Kim's situation?

A)financial independence
B)flexibility
C)control
D)marketplace need

Question 27

Since Donna was laid off from her job a few months ago, she has enjoyed having more time to relax, exercise, and be with her family. Now she is wondering whether she should start her own business. Donna should consider purchasing a franchise ONLY if she ________.

A)does not have enough capital to start an independent business
B)is prepared to handle the heavy workload that comes with a franchise
C)wants the protection from competition that the franchiser would provide
D)is interested in the products sold by a particular franchise

Question 28

Since Ben opened his own computer repair business, he has had to take a lot of time off to care for his mother who has been seriously ill. In his old job, he would not have been allowed to take so much time off. What advantage of owning a small business is BEST displayed by Ben's situation?

A)financial independence
B)opportunity
C)less bureaucracy
D)flexibility

Question 29

Which of the following statements is TRUE about franchising?

A)Franchisees enjoy guaranteed minimum annual revenues based on their territory.
B)Franchisers encourage franchisees to be independent and creative in running their operations.
C)Franchisees have relatively lower risk than other small business startups.
D)Franchisers conduct local market research for each of their franchisees.

Question 30

The quickest and easiest way to start a small business is by establishing a ________.

A)sole proprietorship
B)general partnership
C)limited liability company
D)corporation

Question 31

Joe is very confident about his purchase of a franchise from a well-known full-service restaurant company. What is one of the things he MOST likely did before he bought the franchise?

A)spent months researching the franchiser's background and track record
B)developed a menu of innovative dishes that would differentiate his restaurant from competitors
C)came up with a unique plan to streamline the daily operations of the franchise
D)trained staff to help him run the business

Question 32

Isaac is a franchise owner of a fast food restaurant. When another franchisee is accused of using artificial meat in its hamburgers, sales at Isaac's franchise location drop dramatically. What disadvantage of franchising is BEST demonstrated by Isaac's situation?

A)competition
B)sharing common problems
C)lack of advertising support
D)lack of control

Question 33

Aside from legal liability, what other primary factor should a small-business owner consider before deciding which structure to choose for his business?

A)type of product or service
B)which structure would best appeal to investors
C)tax considerations
D)anticipated number of employees

Question 34

Which of the following does a franchise company offer to people who want to start a business?

A)creative control and flexibility
B)lower initial costs than when starting a business from scratch
C)guaranteed freedom from local competition
D)marketing and financial tools to run a business

Question 35

Technology has had a significant impact on small businesses because ________.

A)the PC and the Internet have made starting a new business much easier
B)the failure of so many Web-based businesses in the late 1990s made capital unavailable
C)the information technology market has become oversaturated and unfriendly
D)most small businesses cannot afford the high costs of new technologies to help run their businesses

Question 36

If you are planning to start a new business, how long should you realistically expect it to take for your business to earn a profit?

A)six to twelve months
B)one to two years
C)three to five years
D)more than five years

Question 37

Martha has just bought a video store franchise. Which of the following factors probably did NOT affect her decision to buy a franchise instead of starting up her own business?

A)availability of training
B)higher franchise startup costs
C)the brand name of the franchiser
D)marketing support from other area franchisees

Question 38

Harvard student Mark Zuckerberg came up with the idea for Facebook as a way to provide a forum for students on his college campus to network and display pictures of themselves and their friends. Today, Facebook has a market value of approximately $750 million and media giants such as Google and Yahoo have been trying to outbid each other for ownership. What reason for starting a small business does the creation of Facebook BEST represent?

A)financial independence
B)unemployment
C)service orientation
D)opportunity knocks

Question 39

A franchise is a method of doing business in which ________.

A)an entrepreneur sets up and manages a small business based on an innovative idea or product
B)a company's products or services are sold to independent third-party operators under the company's name
C)a company buys ownership of another company and absorbs its employees and customer base into its own structure
D)a business is able to achieve rapid sales growth in the service sector due to taking advantage of many advertising opportunities

Question 40

The majority of franchises operate within which industry?

A)fast food
B)full-service restaurants
C)automotive
D)real estate

Question 41

________ of all startups fail in two years.

A)20 percent
B)40 percent
C)50 percent
D)66 percent

Question 42

Many e-commerce businesses failed in the late 1990s because ________.

A)their online stores were a source of identity fraud
B)they were owned by young entrepreneurs
C)there was an economic decline called the "dot-com bust"
D)they did not plan for rapid growth and lacked sufficient inventory to fulfill orders

Question 43

In determining the value of an existing business, one of the potential sources of value is the current owner's goodwill. In this case, goodwill refers to ________.

A)the location of the business in a desirable area
B)intangible assets such as customer service
C)donations to local charities
D)the current owners' membership in professional associations

Question 44

Which of the following statements BEST explains why an initial purchase price of an existing business could be higher than the immediate up-front costs associated with a startup?

A)Existing businesses provide less risk than a franchise within a competitive market.
B)A strategic plan is in place to increase customer satisfaction.
C)A guaranteed customer base is in place to facilitate taking over the business.
D)Suppliers, staff, equipment and inventory are in place to facilitate taking over the business.

Question 45

A ________ is a formal document that states the goals of the business as well as the intended process for reaching those goals.

A)strategy
B)business plan
C)prospectus
D)vision statement

Question 46

Jodi owns a business that designs and creates lingerie. In an effort to get her product into as many stores as possible, Jodi has been lenient on the terms of collection, allowing stores at least 30 days credit. As a result, it is taking her too long to collect payments and her revenues are very low. What is the MOST likely cause of Jodi's business difficulties?

A)Jodi is not developing enough goodwill.
B)Jodi is trying to expand her business too rapidly.
C)Jodi is not adequately managing the financial aspects of her business.
D)Jodi is spending too much of her time on product design.

Question 47

Which of the following questions would provide the BEST information to help you decide whether or not to buy a business?

A)Why did the current owner start the business?
B)Why is the business for sale?
C)What are the demographics of the current customer base?
D)How is employee morale?

Question 48

________ is the process of performing research and analysis of a business to uncover any hidden problems associated with it.

A)Business assessment
B)Due diligence
C)Risk auditing
D)Valuation

Question 49

Which of the following should a business owner create monthly?

A)marketing and operational plans
B)financial statements and budget reports
C)mission statement
D)risk analysis

Question 50

When naming a business, which of the following approaches would NOT be a mistake?

A)hiring a company to create a name
B)using geographic names
C)involving employees or clients in the naming decision
D)using a generic name

Question 51

Which of the following is NOT a symptom of potential small business failure?

A)The owner is ignoring the warning signs that the business is at risk.
B)The owner is attributing business problems to the wrong reasons.
C)The owner lacks college-level business training.
D)The owner does not appear to be in control of the business.

Question 52

Maria is the owner of Pet Heaven, a new pet daycare, grooming and boarding business. Maria envisions her business expanding to five locations in her state within three years. To help her succeed, which of the following does Maria MOST need?

A)familiarity with state licensing requirements
B)a formal business plan
C)more customers
D)a business partner

Question 53

If a business is at risk of failing because it has taken on too much debt, the root cause of such excess debt is MOST likely to be ________.

A)poor business management
B)easy lending practices
C)inadequate business revenue
D)unexpected expenses

Question 54

Alisha has just completed a program in floral design and plans to open her own business as a florist. As part of her preparation, Alisha is working on her operational plan. Which of the following aspects of her business would be included in her operational plan?

A)staffing
B)funding needs
C)pricing
D)risk management plan

Question 55

Identifying your competitors is part of a(n)________.

A)operational plan
B)risk analysis
C)financial plan
D)marketing plan

Question 56

Fred started his new landscaping business with a commercial loan. He uses his credit card to pay for weekly supplies such as fertilizer and mulch. Business growth has been slow and Fred is having a difficult time keeping up with his monthly loan and credit card payments. He is now considering borrowing against his home to stay current with his initial loan and for other needed expenses. Fred's business is MOST at risk because ________.

A)Fred has not acquired enough customers.
B)Fred's home may not have enough equity to qualify him for an additional loan.
C)Fred is taking on too much debt.
D)Fred's business does not have enough revenue.

Question 57

Sam is eager to start a local magazine that will include articles about health and fitness and provide a place for local health and fitness professionals to advertise their services. Which of the following does he NOT need to include in his business plan?

A)risk analysis
B)financial plan
C)product plan
D)operational plan

Question 58

Which of the following is ALWAYS TRUE about the purchases of existing businesses?

A)Once under new ownership, existing businesses outperform initial revenue projections.
B)Once under new ownership, any underlying problems are the responsibility of the new owner.
C)Once under new ownership, consumer curiosity about the new ownership will cause a spike in sales.
D)Once under new ownership, remaining staff are suspicious or fearful of the new owner.

Question 59

Of the following four reasons why new small businesses may fail, which is the MOST common?

A)not enough revenue
B)too much debt
C)poor planning
D)inexperienced management

Question 60

Joanne is considering purchasing an existing day spa. Which of the following should she assume about the current employees of the day spa?

A)Since all employees have been working at the spa for at least a year, they are likely to be competent employees.
B)Since the current owner has indicated that employee morale is high, it is unlikely that there would be problems with the current employees.
C)There may be unanticipated problems with the current employees that Joanne could inherit if she buys the day spa.
D)Most, if not all, of the current employees will choose to stay if Joanne buys the day spa.

Question 61

Timothy is the 60-year-old founder of a publishing company that has over $2 million in annual gross sales. Is he eligible to have a mentor through the Entrepreneurs Organization?

A)Yes, because his company makes more than $1 million annually.
B)Yes, because there are no specific requirements for mentoring.
C)No, because he is over 50 years old.
D)No, because his company can no longer be considered a startup.

Question 62

Rhonda does not know how to go about finding financing for her struggling new business. Which of the following resources would be the BEST place for her to learn more about obtaining financing?

A)a venture capital company
B)a business incubator
C)the Small Business Administration
D)Entrepreneurs Organization

Question 63

Which of the following is NOT true of business incubators?

A)Some business incubators have been started by cities in developing countries.
B)Some business incubators have been started by universities.
C)Some business incubators have been started by the Small Business Administration.
D)Some business incubators have been started by private individuals or organizations.

Question 64

Rashan has been working as a pharmacist at a large drug store chain. He would like to open his own small pharmacy but is not sure if he could be successful given the predominance of large competitors. What part of his business plan would best address his concern?

A)company information
B)risk analysis
C)marketing plan
D)operational plan

Question 65

A(n)________ offers the company expertise that a new business owner does not possess in exchange for a share in its profits and liabilities.

A)partner
B)angel investor
C)advisory board
D)stockholder

Question 66

Small business owners can seek professional advice at no cost through ________.

A)the Service Corp of Retired Executives
B)Fortune 500 companies
C)the Volunteer Corp of America
D)McKinsey & Company management consulting

Question 67

Which of the following statements is TRUE?

A)The Small Business Administration provides tax credits for small businesses.
B)The Small Business Administration provides administrative services to small businesses.
C)The Small Business Administration offers free online training to small business owners.
D)The Small Business Administration works to increase regulatory requirements for small businesses.

Question 68

Alex Garcia has an idea for an internet technology business that involves innovative search engine tools. He was referred to an organization that helps startup businesses by offering resources such as administrative services, technical support, and business networking. This type of organization is called ________.

A)a business incubator
B)the Service Corp of Retired Executives
C)an angel investor group
D)the Entrepreneurs Organization

Question 69

What is the most common reason small business owners neglect to seek outside help when starting a business?

A)They assume that no one outside of their family would be interested in helping them.
B)They believe that professional advice is not necessary.
C)They believe that it is exclusively up to the business owner to make a small business succeed.
D)They think that they cannot afford professional advice.

Question 70

________ support(s)startup businesses by offering resources such as administrative and technical support and business networking.

A)Advisory boards
B)Virtual assistants
C)Partners
D)Business incubators

Question 71

The government agency whose sole purpose is to cater to the needs of small businesses is ________.

A)the Small Business Agency
B)Business.gov
C)Enterprise.org
D)the Small Business Administration

Question 72

Advisory boards generally do NOT have the authority to ________.

A)offer guidance
B)make decisions
C)provide financial knowledge
D)suggest operational improvements

Question 73

Studies show participation in an incubation program ________.

A)increase the success rate of a startup company by as much as 50 percent
B)increase the success rate of a startup company by as much as 60 percent
C)increase the success rate of a startup company by as much as 70 percent
D)increase the success rate of a startup company by as much as 90 percent

Question 74

Volunteers from the Service Corp of Retired Executives provide a variety of services to small businesses. However, volunteers do NOT ________.

A)help with tax planning
B)participate in decision making
C)review business plans
D)offer new ideas and fresh insights

Question 75

The Service Corp of Retired Executives is composed of ________ who can provide advice to small business owners.

A)part-time employees
B)full-time employees
C)freelance executives
D)volunteers

Question 76

Which of the following is a potential disadvantage of teaming up with a business partner?

A)A partner is able to offer only financial help, not practical advice.
B)A partner gains full control of the business's decision-making process.
C)A partner expects a share of the business profits.
D)A partner is not responsible for any of a business's liabilities.

Question 77

What would be the GREATEST advantage of having a partner as opposed to having an advisory board?

A)A partner would be less likely to disagree with the other owner's ideas.
B)A partner would be more committed to the success of the business than an advisory board.
C)A partner would be able to make decisions that differed from that of the other owner.
D)A partner would provide more varied perspectives than that of an advisory board.

Question 78

Which of the following statements about small business failure is FALSE?

A)Business owners may fail if they do not anticipate necessary personal sacrifices.
B)Business owners may fail if they take excessive time in creating a business plan.
C)Business owners may fail if they are not prepared to invest their money and time.
D)Business owners may fail if they are unable to take on multiple responsibilities.

Question 79

An advisory board is composed of ________.

A)a group of experts who make decisions on behalf of the new business owner
B)a group of individuals who offer guidance to the new business owner
C)a group of professionals who provide expertise in return for a share of the new business's profits
D)a group of individuals who fill in for management team members when needed

Question 80

Gary Smith, owner of a small business in San Diego, heard that the Small Business Administration will hold a series of workshops in his city. Which of the following topics is MOST likely to be included in the Small Business Administration's workshops?

A)creating a business plan
B)lobbying
C)filing for unemployment
D)retirement planning