Deck 5: Small Business, Entrepreneurship, and Franchising

Question 1

Small businesses, by their very nature, are small and therefore do not contribute significantly to job creation.

Answer 1

False

Question 2

Manufacturing businesses are attractive to entrepreneurs because of the low start-up costs required to establish a manufacturing business.

Answer 2

False

Question 3

Trevor lives in Florida during the winter months. While in Florida, he rents out his main home in Colorado to people traveling there for the skiing season. Trevor is participating in the sharing economy.

Answer 3

True

Question 4

Marissa is a fitness expert who starts her own personal training company. She conducts fitness classes for women and provides personal training sessions for clients. Marissa can be regarded as a(n)

A) shareholder.
B) entrepreneur.
C) investor.
D) intrapreneur.
E) inventor.

Question 5

A person who is involved in the process of creating and managing a business to achieve his or her desired objectives is engaged in

A) intrapreneurship.
B) capitalization.
C) economics.
D) philanthropy.
E) entrepreneurship.

Question 6

While growing up, Carlos noticed that many families in his community struggled to make ends meet and provide for their children's education. As a result, he started a business to provide low-cost tutoring and scholarship opportunities for low-income families in his community. As his company has grown, Carlos has been able to extend free tutoring and college scholarships to five impoverished students per year. Carlos is a

A) nonprofit entrepreneur.
B) profit entrepreneur.
C) social entrepreneur.
D) sharing entrepreneur.
E) macroentrepreneur.

Question 7

Robert's Music Center is a local music shop. Along with selling musical instruments, it also rents instruments to students in school band programs. Robert is the owner and he employs three full-time and five part-time employees. Robert's business is a

A) social entrepreneurship.
B) limited liability company.
C) small business.
D) micropreneurship.
E) conglomerate.

Question 8

Randy owns a small, local catering business. He has been hired for company picnics, backyard barbecues, and family celebrations. As word of mouth has spread about his delicious food, good service, and fair prices, he has started getting more business. To handle this, he has hired three employees to help cook and serve food at these events. What kind of entrepreneur is Randy?

A) a macroentrepreneur
B) a social entrepreneur
C) a sharing entrepreneur
D) a gig entrepreneur
E) a microentrepreneur

Question 9

Dante runs Night Moves, his own DJ and party planning company. He has built a good reputation for organizing weddings and corporate events and his business has grown. He recently moved his business from his home to an office located in a corporate building and has increased his staff to 40 employees. Dante's company can be categorized as a

A) multinational corporation.
B) limited liability company.
C) franchise.
D) micropreneurship.
E) small business.

Question 10

What is the purpose of the Small Business Administration?

A) It protects consumers against unfair practices by businesses.
B) It offers managerial and financial assistance to small businesses.
C) It protects small businesses against competition from larger companies.
D) It ensures that newly formed businesses adhere to the law.
E) It regulates the issue of stocks by small businesses.

Question 11

Mahie owns an Indian restaurant that employs around 20 people. She is solely responsible for the management of the restaurant. Her business competes with a larger chain of restaurants that offers the same cuisine. Mahie's restaurant can be classified as a

A) multinational corporation.
B) conglomerate.
C) franchise.
D) micropreneurship.
E) small business.

Question 12

What type of business has been growing faster than other classifiable firms and represents almost 30 percent of all small businesses?

A) family-owned businesses
B) minority-owned businesses
C) publicly-owned businesses
D) social entrepreneurships
E) small corporations

Question 13

Baubles and Bangles, an independent jewelry store, acquires jewelry and accessories from producers and wholesalers and sells them to consumers. Baubles and Bangles is a

A) manufacturer.
B) wholesaler.
C) retailer.
D) direct sales company.
E) direct marketing company.

Question 14

If Yvette wants to start her own business, what might persuade her to open a retail operation?

A) Gaining experience in retail is a challenge, so her business would likely have less competition.
B) There are no costs associated with opening a retail business.
C) Retailing does not require interacting directly with consumers.
D) Retailing requires low initial financing.
E) Retailing limits a firm's need to focus on specific groups of consumers.

Question 15

Clarissa makes one-of-a-kind ceramic vases. To avoid the costs of opening a store, she sells these pieces on Etsy. This is an example of

A) service marketing.
B) a sharing economy.
C) wholesaling.
D) direct selling.
E) direct marketing.

Question 16

A clothing store located in a shopping mall wants to give customers an opportunity to place orders. What is one form of direct marketing the store can use to provide this service?

A) It can send catalogs to its customers.
B) It can send sales associates door-to-door to sell its clothing.
C) It can open additional store locations.
D) It can create call centers to contact customers at home.
E) It can customize its clothing to meet specific customer needs.

Question 17

While Justin attends college, he is working part-time for a cutlery company. He goes door-to-door and offers consumers face-to-face presentations in their homes. This is an example of

A) direct selling.
B) direct marketing.
C) wholesaling.
D) manufacturing.
E) telemarketing.

Question 18

All of the following are true of direct selling EXCEPT

A) the cost of getting involved is low.
B) it can be done part time.
C) it requires buying a lot of inventory.
D) those who do it can receive commissions on their sales.
E) those who do it have the opportunity to recruit other distributors.

Question 19

What is true of wholesalers?

A) Wholesalers cannot be eliminated because their functions are too important.
B) Wholesalers receive their products from retailers.
C) Wholesalers do not provide management or merchandising assistance to clients.
D) Wholesalers do not perform marketing activities.
E) Wholesalers are extremely important because of the marketing activities they perform.

Question 20

Walt owns a business in which he offers standardized test preparation classes and individual tutoring for students. This is an example of a

A) manufacturing business.
B) wholesaler.
C) retailer.
D) service business.
E) direct selling business.

Question 21

What is a difference between high technology businesses and other small businesses?

A) High technology businesses never start in garages, basements, kitchens, or dorm rooms, while some other types of small businesses can start in these places.
B) High technology businesses require greater capital and have higher initial startup costs than other small businesses.
C) High technology businesses are less innovative than other small businesses.
D) High technology businesses are the only type of small business that uses technology.
E) High technology businesses have lower initial startup costs than other small businesses.

Question 22

Menami and Michael recently had their first child. As two working parents, they struggled to find good, economical childcare. As a result, they developed their own software to link parents with licensed, reasonably priced childcare providers. This is an example of the

A) sharing economy.
B) market segment economy.
C) service economy.
D) retail economy.
E) consumer economy.

Question 23

Bob and Tom live and work in Texas, but they love vacationing in the Bahamas. After several years, they decide to buy a vacation home in the Bahamas. When they are not there, they rent the property to other people for $1,200 per week. This is an example of

A) a service business.
B) direct selling.
C) social entrepreneurship.
D) the sharing economy.
E) retailing.

Question 24

A challenge associated with the sharing economy is

A) whether workers are viewed as independent contractors or employees.
B) the higher cost of services through this model.
C) the intense competition from established firms.
D) the inability to set standardized rates.
E) the lack of flexibility in this model.

Question 25

As an advantage of being a small business owner, independence means

A) you get to be your own boss.
B) you have freedom from government regulations.
C) you do not have to pay taxes.
D) you have unlimited sources of capital to start and run your business.
E) you have unlimited liability.

Question 26

Seamus has worked for a large corporation for years, and he feels like he just does not fit in the "corporate mold" anymore. He decides to start his own business because he wants the freedom to choose with whom he works and when and where he works. What advantage of small business ownership seems the most prevalent in this example?

A) costs
B) independence
C) flexibility
D) focus
E) reputation

Question 27

A small businesses wanting to minimize its operating costs might do all of the following EXCEPT

A) hire and maintain a large finance department.
B) hire separate firms to supply services as needed.
C) rely on friends and family to help with difficult projects.
D) maintain a smaller staff to save money on wages and salaries.
E) maintain a smaller factory to save money on rent and utilities.

Question 28

Which description is the BEST example of a market niche?

A) all the potential customers who are interested in buying a new vehicle
B) the four deli sandwich shops that serve customers in and near a college campus
C) elderly people, residing in assisted living centers, who suffer from macular degeneration
D) people interested in taking a cruise to any of the Caribbean islands
E) selecting to advertise women's apparel in magazines rather than through television ads

Question 29

What is true regarding the reputation of small businesses?

A) Small businesses likely have multiple locations, and it is difficult to maintain customer service across locations.
B) Because of their capacity to focus on narrow niches, small businesses can develop enviable reputations for quality and service.
C) Since small business employees are often stretched thin by the amount of work they have, their reputations are not as good as larger businesses with more employees.
D) Small businesses often have to cut corners in creating their products, so they have a poor reputation for quality.
E) Small businesses tend to focus more on service than quality, so their reputation is inconsistent.

Question 30

Mark owns his own small bakery. In addition to being the owner, he also serves as the manager, sales force, head baker, shipping and receiving clerk, bookkeeper, and custodian. Mark is the first person to arrive at the bakery every morning and the last to leave every night. What is the most applicable challenge Mark faces?

A) lack of funding
B) pricing mistakes
C) a high stress level
D) underestimating the time commitment for success
E) having poor business concepts

Question 31

Oliver came up with the idea of producing mayonnaise in neon colors. He was sure that kids would love the idea and this would become the hottest product on the market. Unfortunately, the neon-colored mayonnaise wasn't such a hit. What is the most likely cause of Oliver's product failure?

A) overcapitalization
B) coping with growth
C) managerial experience
D) poor business concept
E) high costs of start-up

Question 32

A business that lacks funds to operate normally faces a problem known as

A) underutilization.
B) capitalization.
C) overextension.
D) sustainability.
E) undercapitalization.

Question 33

Kaden and Elizabeth run a small farm stand on their property, selling vegetables, fruits, and plants to support themselves. During a particularly bad growing season, they try to get financing from a small rural bank in their community but they do not get it. What is the most likely reason for this?

A) The small rural bank believed that their business lacked the flexibility to adapt to changing market demands.
B) The bank required a huge sum of money to compete in the mass market.
C) Government regulations do not permit financing small rural businesses.
D) The small rural bank lacked the necessary financial expertise to counter the risks involved with small-business loans.
E) Rural communities have various business guidelines that prohibit rural banks from financing small businesses.

Question 34

Elaine has a great idea for starting a new business, but she is not sure if she has the knowledge or experience to run a growing business effectively. This relates to which cause of small business failure?

A) high stress levels
B) undercapitalization
C) inability to cope with growth
D) managerial incompetence
E) not understanding the competition

Question 35

Why do some small businesses choose to stay small and are not interested in wide-scale growth?

A) Rapidly advancing technology makes it hard for small businesses to expand.
B) Over time, a lack of entrepreneurial spirit stifles the business.
C) Overcapitalization makes it difficult to expand.
D) Escalating costs with growth can threaten the success of the business.
E) Most good business ideas rarely have the potential to do well on a large scale.

Question 36

It has often been said that the greatest impediment to the success of a small business is

A) the entrepreneur.
B) the government.
C) overcapitalization.
D) the business environment.
E) too many target markets.

Question 37

Manuel wants to start his own small business. All of the following are things he must to do to start a business EXCEPT

A) hire employees to work for the business.
B) have a general idea for the business.
C) devise a strategy to guide planning and development in the business.
D) make decisions about form of ownership.
E) make decisions about financial resources needed.

Question 38

Brenda is starting her own small home decorating company. She is developing the company's business plan. What is something the business plan should accomplish?

A) limiting the business's flexibility
B) estimating the business's income and expenses
C) permanently setting the business's goals and strategies
D) establishing rules and regulations for how the business will be run
E) eliminating any future weaknesses of the business

Question 39

In the process of starting a business, along with developing a business plan, the entrepreneur needs to

A) order supplies for the business.
B) develop and employee manual.
C) decide an appropriate legal form of business ownership.
D) promote the business to the customers.
E) file for tax returns for the business with the Internal Revenue Service.

Question 40

Jayla wants to open her own business making cakes. She has $10,000 of her own money and receives another $20,000 from family and friends. This combined $30,000 that Jayla can use toward her new business is referred to as

A) capital.
B) a mortgage.
C) operating income.
D) the initial inventory
E) a line of credit.

Question 41

Roland wants to start a small editing company. He has enough funds to start the business but not enough to run it effectively. What is one thing he can do to provide working capital to his company?

A) He can use his profits to pay his salary.
B) He can borrow funds from outside sources.
C) He can refrain from drawing a full salary.
D) He can invest his profits into other businesses.
E) He can work to find venture capitalists to support his business.

Question 42

Tamika borrows $40,000 from her father for her new business venture. She promises that he will be a partner in the business and be entitled to a significant percent of the business's profits at the end of the year. This is an example of

A) franchising.
B) bartering.
C) equity financing.
D) initial public offering.
E) debt financing.

Question 43

Mark funds small businesses that he believes have the potential to grow large. When these companies are still in their initial stages and need investment, he buys their stocks at a low price and later sells them at higher prices when they are successful. Thus, Mark is a(n)

A) intrapreneur.
B) trade creditor.
C) franchisee.
D) venture capitalist.
E) loan shark.

Question 44

Fiona's small catering business requires more financing than she can provide from her savings. As a result, she is looking for investors to provide financing in exchange for stock ownership. What is a disadvantage of this arrangement?

A) Fiona may lose her business to venture capitalists.
B) Fiona will have to give complete control of her business to the investors until she can pay them back.
C) Fiona will have to share the profits of her business.
D) Fiona may not be able to find venture capitalists who will pay the high prices she is asking for her stock.
E) Fiona could lose her personal assets if the company isn't profitable.

Question 45

Which entity is the main supplier of external financing to small businesses?

A) venture capitalists
B) banks
C) family members
D) friends
E) the Small Business Administration

Question 46

If a small business fails to repay a bank loan, what will the lending institution do to recover its loss?

A) take over the business and run it for profits
B) claim and rent out the business
C) sell stock in the business
D) claim and sell the collateral or mortgage
E) claim and sell all the owner's personal property

Question 47

Frank, the owner of a local hardware store, decides to stock extra snow blowers and shovels this year, since his city is predicted to have an unusually snowy winter. Lacking sufficient capital to purchase the extra inventory, he borrows a predetermined sum of money from his bank. Which source of funding does this scenario best illustrate?

A) trade credit
B) initial public offering
C) venture capital
D) equity financing
E) line of credit

Question 48

Juanita wants to run her own bowling alley, but she does not want to start it from scratch. She decides to buy an existing business. What is one advantage of doing this?

A) It allows her to know all the problems the business already has.
B) It gives her the freedom to develop exactly the business she wants.
C) It eliminates all the costs Juanita would normally have in starting a business.
D) It provides a built-in network of customers, suppliers, and distributors.
E) It eliminates all the guesswork inherent in starting a new business.

Question 49

Noel decides to buy an existing home goods store, instead of starting his own from scratch. After he takes over the business, he learns that several customers have complained that one of the company's distributors does not pack items sufficiently for shipping, and their items arrived broken. What is Noel's responsibility in resolving this problem?

A) Noel is responsible for taking on and resolving any problems the business already has.
B) Noel is not responsible for problems that existed before he bought the company.
C) Noel can require the previous owner to resolve this problem.
D) Noel can expect the customers and distributor to resolve the problem themselves.
E) Neither Noel nor the previous owner is responsible for resolving this problem.

Question 50

Since Sanjana decides to use her savings to purchase the rights to own and operate a Subway outlet rather than starting her own restaurant, she is most likely to be a(n)

A) trade creditor.
B) franchisee.
C) category captain.
D) intrapreneur.
E) venture capitalist.

Question 51

All of the following are advantages of franchising EXCEPT

A) more freedom in purchasing goods.
B) brand-name appeal.
C) national and local advertising programs.
D) proven products and business formats.
E) centralized buying power.

Question 52

Jill has always dreamed of owning and managing a hotel. Instead of starting her own independent hotel, she decides to buy a franchise from Hilton. What is one thing she should keep in mind about becoming a franchisee?

A) It will take a long time to set up her franchise.
B) It will take longer for her franchise to reach its break-even point than it would take for an independent business.
C) She will need to buy equipment, pay for training, and obtain a mortgage or lease.
D) She will have to develop her own processes for operations.
E) She will have the freedom to make all the necessary business decisions, which may be overwhelming.

Question 53

Claire opened her own Starbucks franchise in her community. She is pleased with how quickly she was able to open her franchise and that she was able to establish a good customer base from the start because of name recognition. However, since she started this business to be her own boss, Claire is likely to

A) resent the management training and support the franchiser provides.
B) take sole responsibility for all decisions in the business.
C) get frustrated with the restrictions of the franchise.
D) embrace the franchiser's restrictions because they lead to a greater chance for success.
E) invest his own capital in national and local advertising programs.

Question 54

All of the following are programs and resources a small business owner can use to improve his or her ability to compete with other businesses EXCEPT

A) classified files from his competitors.
B) entrepreneurial training programs.
C) seminars and college courses.
D) local chambers of commerce.
E) national publications and weekly business journals.

Question 55

Jessie owns a small data processing company. In setting up her business, she asks a few other small-business owners she knows for advice on dealing with employees and government regulation, improving processes, and solving problems. What does this scenario exemplify?

A) consulting
B) incubating
C) socializing
D) relating
E) networking

Question 56

Millennials number around 83 million and represent a huge business opportunity in the United States. What is a defining feature of millennials?

A) This cohort is solely concerned about money.
B) This cohort is opposed to working remotely.
C) This cohort prefers face-to-face meetings over virtual communication.
D) This cohort consists of people born between 1946 and 1964.
E) This cohort is concerned with advancement, recognition, and improved capabilities.

Question 57

Rosemary was born in 1952. She is a wealthy North Carolina native. As she ages, Rosemary spends more of her money on travel, financial planning, and health care. Rosemary is a(n)

A) millennial.
B) echo boomer.
C) baby boomer.
D) immigrant.
E) member of Generation Y.

Question 58

Which group represents over 17 percent of those living in the United States and is largely employed in the retail industry?

A) females
B) baby boomers
C) immigrants
D) retired executives
E) males

Question 59

What is true of home-based businesses?

A) Most of today's largest businesses started in offices and eventually moved into their owners' homes.
B) Very few small businesses are based out of the home.
C) Approximately 52 percent of all small businesses are based out of the home.
D) Technology has not had a substantial impact on home-based businesses.
E) Technology has hindered the expansion of home-based businesses abroad.

Question 60

What affect has the economic turbulence of recent years had on small businesses?

A) It has hurt nearly every small business.
B) It removed the opportunity for small businesses to thrive in niche markets.
C) Since small businesses cannot react quickly to change, most were forced into bankruptcy.
D) It has provided both opportunities and threats for small businesses.
E) Most small businesses were bought out by large companies.

Question 61

A company is struggling in the marketplace and decides to reduce layers of management, personnel, and work tasks in order to remain competitive. This company is

A) deregulating.
B) shifting.
C) expanding.
D) layering.
E) downsizing.

Question 62

Bette works for a large company that is trying to function like a smaller company. What might the company do to achieve this goal?

A) The company can increase its management layers.
B) The company can increase its work tasks.
C) The company can make its operating units function more like independent small businesses.
D) The company can increase its corporate staff.
E) The company can split each operating unit into a separate business.

Question 63

Brett works for a large sporting goods corporation. He champions a new football helmet with advanced concussion protection. Brett is a(n)

A) entrepreneur.
B) intrapreneur.
C) innovator.
D) product leader.
E) independent contractor.

Question 64

How do small businesses contribute to the American economy?

Question 65

What is undercapitalization? How does it contribute to the failure of a business?