Deck 5: Small Business and the Entrepreneur

Question 1

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.
E) Many new businesses suffer from a lack of organization.

Answer 1

C

Question 2

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
E) IBM's spinning off of Lexmark

Answer 2

A

Question 3

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
E) accept that this precludes her from starting her own business

Answer 3

C

Question 4

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
E) it has made marketing for new businesses more expensive

Question 5

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

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

Question 6

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
E) motivator

Question 7

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
E) opportunist

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
B) leadership and communication skills
C) innovative
D) self-directed
E) motivated

Question 9

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 generate about 65 percent of net new jobs in the United States
D) they create more than two-thirds of the U.S. gross domestic product
E) they export more than one-half of total U.S. exported goods and services

Question 10

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
E) micropreneur

Question 11

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.
E) Small businesses don't need to adhere to all the regulations that larger companies do

Question 12

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
E) a group of students who create fictional business ventures to test out their viability

Question 13

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
E) enterprise zone

Question 14

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

A) likes to take risks
B) is motivated to succeed
C) prefers not to work around other people
D) prefers not to work for other people
E) is flexible and self-directed

Question 15

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
E) entrepreneurship

Question 16

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
E) a bandwidth need

Question 17

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 start-up business
E) starting a catering company

Question 18

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
E) cater to customers with alternative tastes and preferences

Question 19

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
E) idea for product or service not currently available

Question 20

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 original restaurant
D) understands that there is an increasingly large market for dining experiences
E) wants to be able to run her business out of her home

Question 21

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
E) geographic and demographic studies of the best location to open a new store

Question 22

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.
E) Jodi is making her product available at too many locations.

Question 23

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
E) using a name that tries to marry description with product

Question 24

________ of all start-ups fail in the first year.

A) Just over three-quarters
B) Approximately two-thirds
C) More than one-half
D) Almost a third
E) Nearly one-fourth

Question 25

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
E) training update

Question 26

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 start-ups.
D) Franchisees don't need to pay royalty fees to their franchisers.
E) All franchises restrict the location and number of their franchise locations.

Question 27

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 franchisor'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
E) hired a designer to design the restaurant's layout and decor

Question 28

Which of the following is NOT a disadvantage of franchising?

A) lack of control
B) workload
C) competition
D) brand recognition
E) royalty fees

Question 29

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
E) involvement with the community

Question 30

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
E) requires complete creative control

Question 31

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
E) poor initial training

Question 32

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.
E) Once under new ownership, existing customers will be resentful toward the new owner.

Question 33

________ 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
E) Demographic surveying

Question 34

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
E) a small company is bought by a larger one and is absorbed into its existing structure

Question 35

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.
E) Fred is too lenient on the terms of collection.

Question 36

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 start-up time and energy.
C) An existing business has less competition.
D) An existing business has an existing customer base.
E) It might be easier to obtain financing to purchase the existing business.

Question 37

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) five to ten years
E) more than ten years

Question 38

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 start-up
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
E) the franchise company has influence over the bank's loan decisions

Question 39

Ever since Kim opened her own nail salon,she has made all important decisions about how it is run.She recently launched a website 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
E) unemployment

Question 40

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
E) innovation

Question 41

Maria is the owner of Pet Heaven,a new pet day care,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
E) an MBA

Question 42

Advisory boards generally do NOT have the authority to ________.

A) offer guidance
B) make decisions
C) provide financial knowledge
D) suggest operational improvements
E) act as mentors

Question 43

Which of the following should a business owner create monthly?

A) marketing plans
B) financial statements and budgets
C) mission statement
D) risk analysis
E) operational plans

Question 44

Which of the following is NOT true of business incubators?

A) Some business incubators are sponsored by counties.
B) Some business incubators are run by universities.
C) Some business incubators have been started by the Small Business Administration.
D) Some business incubators are run by technical schools.
E) Some business incubators are sponsored by cities.

Question 45

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.
E) The Small Business Administration is composed entirely of volunteers.

Question 46

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.
E) Business owners may fail if they take on too much debt.

Question 47

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 start-up.
E) No, because his company is not currently a viable operation.

Question 48

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
E) they had too many other online competitors

Question 49

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

A) the Service Corps of Retired Executives
B) Fortune 500 companies
C) the Volunteer Corps of America
D) McKinsey & Company management consulting
E) the Better Business Bureau

Question 50

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
E) mission statement

Question 51

Studies show that participation in an incubation program increases the success rate of a start-up company by as much as ________ percent.

A) 50
B) 60
C) 70
D) 80
E) 90

Question 52

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
E) mentoring

Question 53

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
E) marketing plan

Question 54

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

A) the Small Business Agency
B) National Business Incubators Association
C) the Entrepreneurs Organization
D) the Small Business Administration
E) Service Corps of Retired Executives

Question 55

Alex Garcia has an idea for an Internet technology business that involves innovative search engine tools.He was referred to an organization that helps start-up 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 Corps of Retired Executives
C) an angel investor group
D) the Entrepreneurs Organization
E) the Small Business Administrative Assistants

Question 56

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
E) Service Corps of Retired Executives

Question 57

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
E) marketing plan

Question 58

________ support start-up businesses by offering resources such as administrative and technical support and business networking.

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

Question 59

The Service Corps 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
E) interns

Question 60

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 the management team members when needed
E) a group of interns who assist with administrative duties

Question 61

When borrowing money from friends or family members,you should ________.

A) ask for more money than you think you will need so that you have room to negotiate, recognizing that if they give all that you ask for you do not need to accept all of it
B) provide the person from whom you borrowed money a document indicating how and when you intend to pay them back
C) ask the person from whom you borrow money for advice about how to run your business since they obviously know how to make money
D) provide the person from whom you borrow money a monthly financial report and budget and always ask their opinions before making business decisions
E) explain to the person that this is not a professional relationship, and that it is likely they will not be repaid

Question 62

Small business owners interested in venture capital funding should know that venture capitalists ________.

A) charge interest rates for balances owed and set monthly minimum repayment requirements
B) fund multiple projects but only with a limited amount of money for each
C) provide funding only for capital expenses such as buildings and equipment
D) look for the potential of a public stock offering before investing in a company
E) do not seek a management position or control of the business

Question 63

________ are private venture capital firms licensed by the Small Business Administration to make equity capital or long-term loans available to small companies.

A) Small Business Investment Companies
B) Business incubators
C) Entrepreneurial lenders
D) Angel investors
E) Entrepreneur organizations

Question 64

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.
E) They think outsiders would not act in the best interests of their business.

Question 65

Because entrepreneurs can hire other people to manage their business for them,they do not need strong leadership skills.

Question 66

If you were a venture capitalist,which of the following start-up businesses would you be most likely to fund?

A) a Domino's Pizza franchisee
B) a modern art gallery within a shopping center
C) a producer of unique iPhone applications
D) a private accountant's office
E) a high-end coffee bar

Question 67

A system thinker is someone who focuses on the entire process of turning an idea into reality.

Question 68

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.
E) A partner must take over the role of CEO.

Question 69

When a wealthy individual invests his or her own money into a business project or start-up company with little intention to influence decision making,he or she is MOST often called a(n)________.

A) angel investor
B) venture capitalist
C) financier
D) shadow partner
E) business incubator

Question 70

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.
E) A partner would not be authorized to make decisions.

Question 71

What is the worst thing that could happen to small business owners who use credit cards as a source of financing?

A) They might have to get a second credit card to pay for additional expenses.
B) They might need to significantly increase their revenues.
C) They might pay fines for using personal cards for business purchases.
D) They might spend more than they can afford to pay back.
E) They might need to ask for an increase in their credit limit.

Question 72

Janet planned to purchase a McDonald's franchise.Meanwhile,Jason decided to open his own sandwich shop.Both decided to finance their new business ventures by applying for bank loans.Janet's loan application was approved,but Jason's was denied.Which of the following is the most likely explanation for these results?

A) Banks view franchises as having fewer risks than other start-up businesses.
B) Banks can charge higher interest rates when financing franchisees.
C) Banks consider women business owners to present fewer risks than those who are men.
D) Banks prefer to lend to companies that have the potential of a public stock offering.
E) Banks are not allowed to loan to customers starting a business from scratch.

Question 73

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
E) mentor

Question 74

Johanna plans on being the sole proprietor of a home-based sales consulting business.Since she will work out of her home,her start-up costs should be low.Which type of financing would be BEST for her to use for the start up of her business?

A) personal savings
B) bank loan
C) loan from friends
D) venture capitalist
E) angel investors

Question 75

To qualify for Small Business Administration programs and benefits specifically targeted for small businesses,a business must generally have fewer than 20 employees.

Question 76

Small businesses are important to the economy because they account for more than 90 percent of America's gross domestic product.

Question 77

The major advantage of borrowing money from friends or family to start a business is ________.

A) they will be aware of all credit problems that might affect financing
B) they will not expect to be repaid
C) they will not usually expect a high rate of return on their investment
D) they will ensure that you do not overestimate your initial funding needs
E) they do not need to be kept informed of any risks of the venture

Question 78

Entrepreneurs may be motivated to succeed in order to take care of their families.

Question 79

All of the following are potential benefits of using credit cards to obtain funds for starting a business EXCEPT ________.

A) credit card funds are obtained quickly
B) credit cards have low interest rates on unpaid balances
C) credit cards may have a zero-percent interest rate
D) credit cards are convenient to use
E) credit card balances can be paid off monthly

Question 80

If you're purchasing an existing business or a franchise,banks may offer lines of credit to help you ________.

A) create a business plan
B) find an angel investor
C) avoid borrowing from a savings and loan association
D) make payroll when business is slow
E) repay loans from family and friends