Deck 4: Entrepreneurship, Small Business, and New Venture Creation

Question 1

The part of the economy that is made up of companies and organizations not owned or controlled by the government is called
crown corporations.
split sector.
legislated corporations.
public sector.
the private sector.

Answer 1

the private sector.

Question 2

Women account for ______ of all new businesses that are formed, and they lead ______ percent of the small- and medium-sized businesses that export goods and services.
one-fifth; 6
one-quarter; 18
one-third; 18
one-half; 12
two-thirds; 24

Answer 2

one-half; 12

Question 3

The Heritage Foundation's "index of economic freedom" measures
how well command economies are performing compared to market economies.
the extent to which entrepreneurs have freedom to pursue new business opportunities.
how well entrepreneurs are performing in advanced industrialized countries compared to developing economies.
how much profit entrepreneurs are making in command economies compared to market economies.
the economic freedom entrepreneurs have in various countries, using the U.S. as the comparison point.

Answer 3

the extent to which entrepreneurs have freedom to pursue new business opportunities.

Question 4

According to Industry Canada, small businesses account for over two thirds of employment in all of the following except
other services.
construction.
accommodation and food.
manufacturing.
non-institutional health care.

Question 5

In the 2013 Heritage Foundation index of economic freedom, the top three countries were ______; Canada ranked ______.
Australia, Japan, and Singapore; 25^th
the United States, Germany, and Japan; 8^th
the United States, Ireland, and Germany; 11^th
Hong Kong, Singapore, and Australia; 6^th
China, Japan, and South Vietnam; 37^th

Question 6

Nascent entrepreneurs are
people who have recently sold their business.
people who actually have started a business.
people who are trying to start a business.
people who have been in business over 10 years.
people who are in their first year of business.

Question 7

Approximately how many new businesses are started each day in Canada?
25
100
250
380
500

Question 8

Self-employed Canadians account for ____percent of the workforce.
3
5
16
22
34

Question 9

During the period from 2001 to 2011, small businesses created ____ percent of all the jobs in Canada.
8
15
28
43
51

Question 10

Individuals who both recognize and seize opportunities are referred to as
speculators.
franchisees.
entrepreneurs.
intrapreneurs.
independents.

Question 11

The Swiffer product line from Procter & Gamble was the result of __________ in a large firm.
product refinement
intrapreneurship
entrepreneurship
starting a business from scratch
marketing research

Question 12

A small business is an owner managed business with less than ________ employees.
25
50
10
500
100

Question 13

What percentage of Canada's GDP is contributed by small businesses?
7 percent
13 percent
19 percent
30 percent
41 percent

Question 14

What percentage of businesses in Canada have less than 100 employees?
98
58
88
78
28

Question 15

Which is the most common source of ideas for a new venture?
Brainstorming
Family
Work experiences
Children
Magazines

Question 16

Which of the following is correct with regard to the issue of where new ideas for a business come from?
The most important source of ideas for a new venture arise as the result of a conscious search for new venture ideas.
About half of all new venture ideas come from insights gained or skills learned at a previous job.
Personal hobbies or interests are the most important source of ideas for a new venture.
Suggestions from family members are an important (but not the most important) factor in coming up with new venture ideas.
There is no particular pattern in the development of ideas for a new venture.

Question 17

Which of the following is correct with regard to small business?
Various measures might be used to define a small business, including the number of people the business employs, the company's sales revenue, the size of the investment required, or the type of ownership structure the business has.
Since the Business Register tracks businesses and the Labour Force Survey tracks individuals, these sources of information are not useful in defining the term "small business."
To be included in the Business Register, a business must have at least five paid employees.
In the Business Register, a goods-producing company is considered small if it has fewer than 500 employees, while a service-producing business is considered small if it has fewer than 100 employees.
All of these are correct.

Question 18

In the Business Register, a goods-producing business is considered small if it has fewer than ____employees, and a service-producing business is considered small if it has fewer than ___ employees.
1000; 500
500; 1000
100; 50
500; 250
250; 500

Question 19

A new firm is
one that has been in business for 5 years or less.
one that has not yet opened for business.
one with less than 10 years' experience.
one that has become operational within the previous 12 months.
one that opened its doors within the past 6 months.

Question 20

What are the three key elements in the entrepreneurial process?
The entrepreneur, the opportunity, and the marketing plan
The marketing plan, the production plan, and the finance plan
The product (or service) plan, the entrepreneur, and luck
The entrepreneur, the opportunity, and the resources
The financing plan, the product (or service) plan, and luck

Question 21

Franchising is a contract between a(n) ________ and a(n) ________ that stipulates how ________ or ________ will be sold.
buyer; seller; a product; a service
retailer; outlet owner; food; a service
manufacturer; dealer; a product; a service
manufacturer; seller; a service; a product
outlet owner; dealer; food; a service

Question 22

Bootstrapping involves all of the following actions except
acquiring resources such as people and equipment.
doing more with less.
purchasing as many resources as possible.
using other people's resources.
borrowing materials.

Question 23

With respect to the financing of a business, which one of the following statements is accurate?
Love money is the most popular form of debt financing.
Suppliers typically provide long-term financing.
Debt financing refers to money invested by the owner in the company.
Borrowing money reduces the potential for higher returns when a business is performing well.
Banks are typically risk averse.

Question 24

Which source of capital is identified as a group of small investors who are willing to invest money into the new firm in exchange for an ownership share?
Venture capital firm
Foreign investors
Stockbroker syndicate
Silent domestic partner
Banks

Question 25

Karen is trying to assess whether she can start her own small business. But, as with many small businesses, money is a problem. She asks for your help. You indicate that the most likely source of money for starting up a small business is
family investment.
lottery winnings.
banks.
credit unions.
personal savings.

Question 26

Bootstrapping means
doing more with less.
selling shares.
designing new products.
preparing a business plan.
creating new ideas.

Question 27

A ________ typically includes a company description, product description, marketing analysis and plan, operating plan, financial plan, and other supporting information.
bank loan application
business plan
tax application
partnership agreement
grant application

Question 28

One popular source of equity capital is informal capital from private investors who are known as
private loaners.
traditional lenders.
pseudo loaners.
off-the-books financers.
angels.

Question 29

Venture capitalists
require collateral for all transactions.
are risk averse lenders.
invest funds from professionally managed pools of investor money.
offer loans with a maximum 90-day payback period.
are individuals in the U.S. who are willing to loan money to Canadians who want to start a business.

Question 30

Which of the following is correct with regard to business planning?
A business plan is a good thing to have, but it is generally not a requirement for securing resources for the proposed new venture.
If market conditions are changing rapidly, the benefits gained from extensive research and planning will diminish quickly.
If the product is highly innovative, research is particularly important.
Planning should be completed before action is taken.
All things considered, it is probably best to plan to start as a franchise.

Question 31

A financial forecast includes all of the following items except
a cash budget.
an estimate of start-up costs.
an income statement.
a listing of potential customers.
a balance sheet.

Question 32

Assets that a borrower uses to secure a loan or other credit are referred to as
financed assets.
tangible assets.
fixed assets.
collateral.
assignments.

Question 33

Erin feels that she has a wonderful opportunity to create a new apple beverage she saw in Europe by using surplus apples grown near Georgian Bay in Ontario. At this point, which question must she answer in evaluating this opportunity?
What interest rate will be charged for financing the purchase of capital equipment?
What depreciation procedures will be used?
What kind of computers should I purchase?
Where will my business be located?
Are there enough customers willing to buy this product?

Question 34

Which one of the following statements is correct?
Love money is a form of debt financing.
Suppliers typically provide long term financing.
Debt financing refers to money invested by the owner in the company.
Borrowing money reduces the potential for higher returns when a business is performing well.
Banks are typically risk averse.

Question 35

Trade credit is
the selling of bonds or debentures.
reinvested in the enterprise.
paid to the owners in the form of dividends.
derived from funds generated from the operation of the business.
delayed payment terms offered by suppliers.

Question 36

When screening ideas, an entrepreneur would ask all of the following questions except
is the idea marketable?
does this idea have a high entrance cost?
does this idea create or add value for the customer?
does the idea provide a sustainable competitive advantage?
is the idea financially viable?

Question 37

Sam has always been interested in starting his own business but, as a recent graduate, is not certain where he can get ideas. Which of the following is a good reliable source for information needed to make the decision to start a new business?
Experience in industry before starting a new business
Parents
Teachers
Bankers
Business analysts

Question 38

With regard to the process of screening possible ideas for a new idea, which of the following is correct?
Determining whether or not the new idea adds value for customers is not essential at this early stage of the process.
It is not possible to determine at this early stage whether a new idea will actually give a company a sustained competitive advantage.
It is important to determine if sales will lead to profits.
If the idea is not expected to result in making a profit for a number of years, exit costs are low.
All of these are correct.

Question 39

Robert wants to start a new business. At this point, he needs to ask himself all of the following questions except
What is my competitive advantage?
How much will the customer buy?
What legal form should the business take?
What value is created or added to for the customer?
What is the marketability of this idea?

Question 40

Which of the following statements is (are) correct with respect to financing a business?
Debt financing refers to money that is borrowed, while equity financing refers to money that is invested in the business by investors in return for a share of the ownership of the company.
The most common source of debt financing is venture capitalists.
Choosing between debt and equity financing involves trade-offs with regard to immediate vs. long-term profitability.
Most new venture founders prefer equity financing because they are reluctant to give up any control to outsiders.
All these statements are correct.

Question 41

Which of the following statements is accurate?
Love money is a form of debt financing.
Borrowing money reduces the potential for higher returns when a business is performing well.
Debt financing refers to money invested by the owner in the company.
Banks are typically risk averse.
Suppliers typically provide long term-financing.

Question 42

Harold's father owns a plumbing business, which Harold will likely take over. However, Harold needs to know the problems that beset family businesses. Which of the following is not a problem in a family business?
Untrained and uneducated family members as personnel
Failure to respond to changing market conditions
Choosing an appropriate successor
Consistent under-financing
Disagreement among family members about the future of the business

Question 43

An example of a debt source of funds is ________ and an example of an equity source of funds is ________.
family and friends; venture capitalists
private lenders; family and friends
private lenders; trade credit
venture capitalists; private lenders
family and friends; private lenders

Question 44

Which of the following is correct with regard to collateral?
It refers to business (but not personal) assets that a borrower uses to secure a loan or other credit.
It consists of tangible assets like buildings as well as intangible assets like goodwill.
Collateral can be seized by the lender if the loan is not repaid according to specified terms.
It refers to personal (but not business) assets that a borrower uses to secure a loan or other credit.
Banks are most impressed with debt investment.

Question 45

Jody is a young graduate from a business program. She can either help out in the family business or work with another organization. Which of the following is not a typical advantage associated with a family business?
Highly trained individuals
Valuable community relationships
Personal sacrifices leading to financial advantage
High employee loyalty
Unified family management

Question 46

Roger has made a list of what he considers to be advantages of buying a franchise. You tell him that one item on his list is not an advantage. Which one is it?
Improved chances of success
Access to big business management skills
Don't have to build a business step by step
Incentive of owning your own business
Low start-up costs

Question 47

Molly believes that success is almost guaranteed when one buys a franchise. You point out that she should consider the costs such as
emergency needs.
operational expenses.
the franchise sales price.
training expenses.
all of these.

Question 48

Which of the following is not likely to be provided by the seller of a franchise?
Financing help
Guarantee of success
Marketing strategy
Training for employees and managers
Management advice

Question 49

Margaret has an opportunity to buy an existing business. She should be knowledgeable about all of the following issues except
the location of the business.
legal form of the business.
difficulty in determining an appropriate price for the business.
incomplete knowledge of the state of the business.
the reputation of the business.

Question 50

A business is normally at its riskiest point during the ________ phase.
preliminary
growth
start-up
maturity
conception

Question 51

The ________ fit involves determining if the resources needed to capitalize on the opportunity can be acquired.
resource‒entrepreneur
personal‒entrepreneur
entrepreneur‒opportunity
opportunity‒resource
entrepreneur‒resource

Question 52

To start up a new business by operating under a license issued by a parent company to local entrepreneurs who own and manage the business is known as
a small business.
a macroenterprise.
an enterprise.
a microenterprise.
a franchise.

Question 53

Judy is a graduate from a denturist program. Normally, graduates start up their own business, much like dentists and doctors. She has the choice of starting on her own or buying an existing practice. What is an advantage for her of starting a new business from scratch?
No problems as a result of the prior owner's errors
Odds are better to succeed
Relationship with suppliers already established
Needs and desires of customers known
The risks are lower than if she were to buy an existing practice

Question 54

Ted is about to take over a family business. The issues of which he should be aware include all of the following except
assuring economic security for the retiring leader and spouse.
training the successor.
benefits for the successor.
timing the succession.
successor selection.

Question 55

About one-third of all new businesses owners
buy an existing business.
start from scratch.
buy out a partner.
win the business in a draw.
inherit the business.

Question 56

In a franchise agreement, the ________ is purchasing the right to sell the products of the ________.
franchisee; franchiser
franchiser; parent company
franchiser; franchisee
pigeon; shyster
subleaser; leaser

Question 57

All of the following are common sources of equity for new ventures except
banks.
personal savings.
love money.
private investors.
venture capitalists.

Question 58

The benefits of franchising the franchiser enjoys include all of the following except
more revenue.
more financing.
more involvement in the details of local operations.
advertising money is spent more efficiently.
rapid growth.

Question 59

Which of the following is considered an advantage for both the franchisee and the franchisor?
Guaranteed success
Economies of scale in buying
Promotion savings
Recognition
Management assistance

Question 60

Which of the following is not one of the disadvantages of owning a franchise?
High failure rates
Sacrifice of independence
Difficult to terminate
On-going payments to the parent company
High start-up costs

Question 61

Low start-up costs, simplicity in formation, and freedom are advantages in establishing a
corporation.
sole proprietorship.
partnership.
joint venture.
cooperative.

Question 62

If sole proprietor Tom decided to merge his business with that of Cindy, another sole proprietor, a ________ would result.
partnership
T-4A special corporation
publicly-traded corporation
dual proprietorship
co-operative

Question 63

Which of the following is an advantage for the franchisee?
Freed from detail of local operations
Recognition
Rapid growth for the franchise
Low entry cost
Guaranteed success

Question 64

There are two basic types of partners: ________ and _________.
dormant; active
key; secondary
secret; open
general; limited
primary; secondary

Question 65

Which of the following statements about partnerships is false?
A partner cannot sell their interest without the other partners' consent.
The partnership terminates upon the death of a partner.
A partner cannot retire without the other partners' consent.
General partnerships are limited to ten partners.
It is easier to borrow money than a sole proprietorship.

Question 66

Many professional organizations, such as law firms and accounting firms, are formed as
joint ventures.
partnerships.
public corporations.
private corporations.
sole proprietorships.

Question 67

The features of a sole proprietorship include all the following except
a lot of government paperwork
simple to form.
easy to dissolve.
limited resources.
unlimited liabilities.

Question 68

The size of a partnership is
limited to a maximum of $100 million in annual sales.
unlimited.
limited to a maximum of 100 partners.
limited to a maximum of 1000 employees.
limited to a maximum of $10 million in annual sales.

Question 69

Low start-up costs and simplicity of operations are among the main advantages of
a sole proprietorship.
selling shares.
incorporating.
a co-operative.
none of these.

Question 70

Which of the following is not typical for a sole proprietorship?
Limited liability
Losing money at start-up
Lack of continuity
Easy to dissolve
Hard to borrow money

Question 71

Franchising accounts for about ____ percent of retail sales in Canada and ____ percent of GDP.
10; 20
20; 30
40; 10
60; 15
80; 55

Question 72

Tax laws permit ________ to treat the sales revenues and operating expenses of the business as part of their personal finances.
sole proprietorships
joint ventures
privately-held corporations
either publicly-held or privately-traded corporations
publicly-held corporations

Question 73

A limited partnership attempts to
avoid the problem of unlimited liability for the owners.
limit the number of partners who may purchase a share of ownership.
provide for continuity of operation upon the departure of one of the partners.
limit the number of partners who may vote at board meetings.
limit the geographical area of operation for a business firm.

Question 74

A new business typically adopts one of four main organizational forms. They are
franchise, sole proprietorship, partnership, or corporation.
franchise, partnership, corporation, or co-operative.
sole proprietorship, franchise, corporation, or co-operative.
sole proprietorship, partnership, corporation, or co-operative.
debt, equity, venture capital, or gifted.

Question 75

Partnerships are generally more advantageous than sole proprietorships because
the talents of the partners can be pooled.
some businesses can only be formed as partnerships.
there are many types of partnerships.
partners are jointly and severally liable.
many people can be the president of the company.

Question 76

Jeanne is not an active participant in Highline Food Company, but she has contributed a significant amount of capital as a partner to the business. Jeanne is known as a(n) ________ partner.
managing
general
limited
dormant
secret

Question 77

Sam Clark has a custom cheesecake business that he owns and operates out of his home. Sam's ownership structure likely is
a franchise.
a limited partnership.
a partnership.
a corporation.
a sole proprietorship.

Question 78

Paul invests $50 000 in a partnership with his sister to operate a computer sales outlet. Paul is not involved in the operation of the store and has limited liability through the written partnership agreement. What kind of partner is Paul?
Secret
Ostensible
Limited
Dormant
General

Question 79

A general partnership has advantages which are similar to a sole proprietorship, such as
easy to transfer ownership.
limiting owner's liability.
being simple to organize.
providing for continuity.
being dependent upon resources of an individual.

Question 80

A major disadvantage of the sole proprietorship is the
ability to grow by adding talent.
high start-up costs.
unlimited liability.
lack of freedom in making business decisions.
difficulty in beginning business activities.