Deck 6: Entrepreneurship and Small Business Ownership

Question 1

SCORE is an acronym for the Service Corps of Retired Entrepreneurs.

Answer 1

False
Explanation: Service Corps of Retired Executives (SCORE)is a resource partner of the Small Business Administration.

Question 2

Compared to starting a new business,buying an existing business can involve more work and more risk.

Answer 2

False
Explanation: Compared to starting a new business, buying an existing business can involve less work and less risk-provided, of course, that you check out the company carefully.

Question 3

Outsourcing reduces opportunities for small businesses and entrepreneurs.

Answer 3

False
Explanation: Outsourcing, the practice of engaging outside firms to handle either individual projects or entire business functions, creates numerous opportunities for small businesses and entrepreneurs.

Question 4

Financing a business you are starting from scratch is often easier than financing an existing business.

Question 5

Intrapreneurship is a term coined by business consultant Gifford Pinchot to designate entrepreneurial efforts within a larger organization.

Question 6

The first infusion of capital that a business receives is called seed money.

Question 7

Unlike a corporate board of directors,an advisory board has legal responsibilities.

Question 8

Business start-ups decline when the economy sours.

Question 9

A 12-employee executive recruiting firm making $750,000 per year would be a small business.

Question 10

An advisory board is a form of "group mentoring" in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

Question 11

Angel investors provide money to finance new businesses in exchange for a large rate of interest.

Question 12

Motivational collapse occurs when the would-be entrepreneur encounters one too many setbacks and simply doesn't have the drive to keep going.

Question 13

Facilities that house small businesses and provide support services during the company's early growth phases are called angel investors.

Question 14

Among all firms that apply for U.S.patents on new inventions,small businesses receive 13 times more patents per employee than larger firms.

Question 15

The start-up schedule section in a business plan would forecast its income,expenses,and cash flow for the first 3 years of business.

Question 16

In the business plan,the exit strategy explains how and when the owner will close her business.

Question 17

Lifestyle businesses are small only because they are new and have ambitious plans to grow.

Question 18

In large organizations,mechanisms put in place to prevent mistakes can also hamper innovative thinking by restricting people to tried-and-true methods.

Question 19

A business plan summarizes the proposed business venture,goals,and plans for achieving those goals.

Question 20

The practice of engaging outside firms to handle either individual projects or entire business functions is called downsizing.

Question 21

Which of the following is one of the main reasons that small businesses are using social media for marketing and advertising?

A) Many of their employees are social media mavens.
B) Social media offers their customers robust protection from identity theft.
C) Social media offers a noncompetitive space where they can sell their products.
D) Social media allows them to stretch their small advertising and promotional budgets.
E) Big businesses have avoided social media in favor of traditional advertising and promotion.

Question 22

Small businesses employ about ________ of the private-sector workforce and create roughly ________ of all new jobs.

A) one-third; one-fifth
B) half; two-thirds
C) one-fourth; half
D) two-thirds; half
E) one-third; two-thirds

Question 23

Which of the following is a quality that a successful entrepreneur is most likely to have?

A) unwillingness to take risks
B) unwilling to make any sacrifices in other areas of life
C) high need to be motivated by an external agent
D) always measures success in strictly financial terms
E) views failure as a chance to grow

Question 24

Which of the following is TRUE about a small business?

A) A small business employs from 500 to 1000 employees.
B) A small business is usually funded by personal lines of credit, and not through bank loans and microlenders.
C) A small business is one that is not dominant in its field.
D) A small firm usually curtails the freedom to innovate.
E) A small firm avoids risks that larger firms are willing to take.

Question 25

Technical Solutions Inc.,a leading software solutions firm in Dallas with 1000 employees,is facing a financial crunch because of the economic downfall.Several of its key investors have backed out,and it has lost some projects to its competitors.The CEO of the company considers cost-cutting measures to turn around the organization.An analysis of the situation reveals that many of its employees have become redundant as their work roles have reduced considerably.The firm also employs a large number of people who are almost at the retirement age.Which of the following measures will be most appropriate for the company,from a business perspective?

A) downsizing
B) vertical integration
C) outsourcing
D) diversification
E) market penetration

Question 26

A small business is defined as a company that ________.

A) is newly launched and has fewer than 100 shareholders
B) is dominant in its field and employs fewer than 1,500 employees
C) has revenue of less than $750,000
D) is independently owned and operated and not dominant in its field
E) is funded through personal lines of credit and has fewer than 1,000 employees

Question 27

Three factors contributing to the increased number of small businesses are technologies such as e-commerce,growing diversity in entrepreneurship,and ________.

A) downsizing and outsourcing
B) increased ease in going public
C) nationalization
D) market regulation
E) monopolistic business practices

Question 28

Baskin-Robbins gives its franchisees the right to resell its trademarked goods that must be purchased from Baskin-Robbins.This is an example of a product franchise.

Question 29

If you invest in a successful franchise,you know you are getting a viable business model,one that has worked many times before.

Question 30

TechPoint,a technical writing and business documentation firm,finds it difficult to handle its training requirements.The company forms a one-year contract with Impact Inc.,a language-training firm,to conduct training and refresher courses for their employees.This is an example of ________.

A) downsizing
B) outsourcing
C) vertical integration
D) market penetration
E) diversification

Question 31

Small companies tend to differ from large ones because ________.

A) they have a wider focus compared to larger companies
B) they are mostly launched with more financial backing than larger companies
C) they have less freedom to innovate and move quickly compared to larger companies
D) they can react to market changes and make decisions more quickly than larger companies
E) they are more bureaucratic compared to larger companies

Question 32

Funding a business with credit cards or a personal line of credit is extremely risky.

Question 33

The positive,forward-thinking desire to create a profitable,sustainable business is called ________.

A) optimism
B) entrepreneurial spirit
C) fiscal discipline
D) marketing strategy
E) business implementation

Question 34

If customer demand for the goods or services sold by your franchise changes,you have the ability to quickly adapt your business in response.

Question 35

One of the general characteristics of a small business is that it typically sells fewer products ________.

A) to a larger customer base
B) to fewer market segments
C) to foreign companies
D) at lower costs to government agencies
E) at higher costs

Question 36

When companies go public,they put out an IPO,or initial public offering.

Question 37

Which of the following is TRUE regarding high-growth ventures?

A) They are usually run by one individual rather than a team.
B) They refer to businesses such as a self-employed consultant, a corner florist, or a small e-commerce venture.
C) They are mostly family businesses.
D) They are built around the personal and financial needs of an individual.
E) They expand rapidly by obtaining a sizable supply of investment capital.

Question 38

Todd D.Morrison is the manager of an advanced research team at LCM Inc.,a pharmaceutical company.Todd is keen to introduce process improvements aimed at making the business unit more profitable.He also uses innovative leadership methods,such as giving team members greater flexibility and freedom.Todd takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.Todd Morrison's efforts are an example of ________.

A) intrapreneurship
B) outsourcing
C) downsizing
D) vertical integration
E) horizontal integration

Question 39

Which of the following is an example of a lifestyle business?

A) A paper-recycling unit that employs about 800 employees.
B) A self-employed landscape designer.
C) Nature's Delights, an international gourmet food chain reputed to be the world's leading retailer of natural and organic foods.
D) Museum of Fine Arts, a government-funded museum that houses a collection of 19th and 20th century American, German, and French paintings.
E) Freedom Books, a firm that is the leader in the English-language book publishing sector.

Question 40

Barbara owns a small florist shop that employs a couple of part-time floral designers.She doesn't expect her business to grow much,but it provides her with a comfortable income and she enjoys what she does.Barbara's business would be described as a ________.

A) mid-size enterprise
B) retail business
C) lifestyle business
D) high-growth venture
E) service business

Question 41

Which of the following statements is TRUE regarding the failure rates of new businesses?

A) It is possible to calculate a precise figure that represents all types of businesses across all industries.
B) The definition of "failure" remains the same across businesses and business owners.
C) Establishing a time frame is not essential for a failure rate to have any meaning.
D) Structural changes in the economy are unrelated to the failure rates of new businesses.
E) The failure rate of new businesses is usually high during the first year.

Question 42

Intrapreneurship refers to ________.

A) entrepreneurial efforts within a larger organization
B) starting a business by buying into a franchise system
C) starting a business by buying an existing independent business
D) individuals who are responsible for strategic corporate social responsibility activities within an organization
E) the processes, customs, policies, laws, and institutions, which have an effect on the way a company is controlled

Question 43

A business plan outlines that investors will be able to sell their investment through a public stock offering,or a buyback of the investors' interest.This is an example of which of the following elements of a business plan?

A) start-up schedule
B) operations plan
C) exit strategy
D) marketing strategy
E) target market

Question 44

Barbara decided to open an independent bookstore.However,after careful consideration,she decided to purchase an existing bookstore called BookStop from an owner who was retiring.Which of the following statements,if true,is most likely to make Barbara's business successful?

A) Barbara decides to change the layout of the bookstore and repaint the walls.
B) The government increases the taxes on small businesses.
C) Barbara decides to reduce the freedom given to the existing employees by the previous owner of BookStop.
D) Barbara does not like the existing business processes and systems, so she decides to build them from scratch.
E) BookStop was a profitable business with many loyal customers.

Question 45

All of the following EXCEPT ________ represent leadership issues that can cause a new business to fail.

A) managerial incompetence
B) lack of strategic planning
C) poor cash management
D) lack of relevant experience
E) inability to transition from corporate employee to entrepreneur

Question 46

A(n)________ is a form of "group mentoring" in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

A) advisory board
B) business incubator
C) venture capitalist
D) angel investor
E) micro lender

Question 47

Preparing a business plan serves which of the following functions?

A) It assists the owners in preparing publicity releases for the business.
B) It helps persuade lenders and investors to finance the business.
C) It identifies sources of potential employees for the business.
D) It fulfills the requirements set forth by the Small Business Administration.
E) It meets licensing regulations established by the local government.

Question 48

At the federal level,small businesses can apply for loans backed by the ________.

A) Center for Emerging Technologies
B) U.S. Chamber of Commerce
C) Service Corps of Retired Executives
D) Venture Capitalists Association (VCA)
E) Small Business Administration

Question 49

________ provide a small business with a wide array of support resources and services during its early growth phase.

A) Seed centers
B) Business incubators
C) Microlenders
D) Angel investors
E) Intrapreneurs

Question 50

In exchange for a small share of ownership,KMC Group makes a small investment in TechPro,a new,independent software firm.KMC Group provides support to TechPro during its early stages by helping the founders refine their ideas,hire suitable employees and train them,establish connections with industry insiders,and deal with legal issues.KMC Group is most likely to be a(n)________.

A) advisory board
B) mentor
C) business incubator
D) seed center
E) microlender

Question 51

Which of the following is most likely to encourage entrepreneurship?

A) inability to find attractive employment anywhere else
B) increased market regulations
C) inadequate protection of property rights
D) excessive market regulation
E) monopolistic business practices

Question 52

An advisory board differs from a corporate board of directors,because ________.

A) an advisory board has legal responsibilities
B) you don't have to incorporate to establish an advisory board
C) you usually require high amounts of financial compensation to consult an advisory board
D) members of an advisory board lack subject-area expertise
E) advisors are required to obtain certification from SBA

Question 53

SCORE is a resource partner of the ________.

A) Small Business Online Community
B) Minority Business Development Agency
C) Small Business Administration
D) United States Chamber of Commerce
E) Center for Emerging Technologies

Question 54

Matthew decides to open a cafe in his neighborhood,called Coffee Beans.While analyzing the start-up options,he decides against buying an existing independent business,or even buying into a franchise system.Because of a recent reduction in the availability of loans to entrepreneurs,he is unable to get a bank loan.He is likely to have which of the following benefits?

A) He will have established brand recognition.
B) Since business processes and systems are usually in place, he need not create them.
C) Support networks are already in place, so he need not update them.
D) He need not hire and train the workforce at his own expense.
E) He will experience very high freedom and flexibility.

Question 55

Which of the following is TRUE about creating a new,independent business?

A) The possibility for borrowing start-up capital or getting investors is more, compared to buying an existing business.
B) The owner's freedom is less, compared to buying an existing business.
C) The business processes and systems are usually already in place.
D) The workforce is usually already in place.
E) The customer base must be built from the ground up.

Question 56

Which of the following is an advantage of buying into a franchise system?

A) It comes with an established business system.
B) It comes with a workforce.
C) It already has a customer base with ongoing sales.
D) It allows the owner to have a very high level of freedom.
E) It requires the owner to establish brand recognition from scratch.

Question 57

A company's ________ defines how it will generate revenue and produce a profit.

A) business plan
B) mission statement
C) business model
D) executive summary
E) entrepreneurial spirit

Question 58

Which of the following statements is TRUE about the Service Corps of Retired Executives (SCORE)?

A) It is a resource partner of the SBA.
B) It works on a contractual basis with large businesses.
C) It offers advice and one-to-one counseling to entrepreneurs, in return for company shares.
D) It offers resources and programs to minority-owned businesses.
E) It hires retired executives to work as consultants for a nominal fee.

Question 59

A business plan is a written document that summarizes the ________.

A) cost benefit analysis of the business
B) sources of financing for the business
C) proposed business venture, goals, and plans for achieving those goals
D) personal financial statements of the business owners
E) organization's exposure to internal and external threats

Question 60

Which of the following statements is TRUE about intrapreneurship?

A) It increases bureaucracy and hinders innovation.
B) It refers to individuals who start new, independent businesses.
C) It refers to individuals who start a business by buying into a franchise system.
D) It involves working with tried-and-true methods.
E) It can be risky behavior that may or may not be rewarded.

Question 61

A company that licenses elements of its business system to other companies is called a ________.

A) franchisor
B) venture capitalist
C) angel investor
D) intrapreneur
E) business mentor

Question 62

Well-known examples of ________ include Taco Bell,Pizza Hut,The UPS Store,and Curves fitness centers.

A) product franchises
B) business franchises
C) manufacturing franchises
D) global franchises
E) discount franchises

Question 63

Private individuals who put their own money into start-ups,with the goal of eventually selling their interest for a profit,are called ________.

A) angel investors
B) microlenders
C) venture capitalists
D) advisory boards
E) business incubators

Question 64

Small businesses can seek private financing in all of the following ways EXCEPT ________.

A) selling stocks and bonds
B) seeking angel investors
C) tapping personal savings
D) attracting venture capitalists
E) using credit cards and lines of credit

Question 65

A ________ gives a franchisee the right to produce and distribute the manufacturer's products,using supplies purchased from the franchisor.

A) product franchise
B) business-format franchise
C) manufacturing franchise
D) licensed franchise
E) utilitarian franchise

Question 66

________ are organizations,often not-for-profit,that lend smaller amounts of money to business owners who might not qualify for conventional bank loans.

A) Angel groups
B) Venture capitalists
C) Angel investors
D) Microlenders
E) Franchises

Question 67

Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership,with the objective of reselling the business at a profit are called ________.

A) angel investors
B) microlenders
C) venture capitalists
D) advisory boards
E) business incubators

Question 68

________ is a combination of private and public financing,in which an entrepreneur invites people to fund a share of a new business venture or a new product.

A) Crowdfunding
B) Microlending
C) Angel investment
D) Business incubator
E) Threshold pledge system

Question 69

Funding a new business with credit cards or a personal line of credit ________.

A) is the least expensive form of financing
B) is subject to a lot of bureaucratic procedures
C) involves minimum amount of risk
D) is used by very few entrepreneurs
E) is a widely available form of financing

Question 70

Which of the following statements is TRUE about venture capitalists?

A) They are private individuals without specialized investment skills.
B) They make investments in large, established businesses.
C) They usually make investments in low-risk, low-potential areas.
D) They simply provide money to new ventures, and do not provide managerial advice.
E) They are extremely focused and selective while investing in companies.

Question 71

The institution that actually provides the money for an SBA-backed loan is the ________.

A) venture capitalist
B) bank
C) SBIC
D) business incubator
E) IPO

Question 72

Unlike venture capitalists,angel investors tend to ________.

A) invest larger amounts of money in start-ups
B) remain involved with the company for a very short time
C) focus more on local opportunities
D) be investment specialists with an extremely focused and selective approach
E) invest mostly in high-potential areas

Question 73

Keri Sears uses the funding platform Kickstarter to solicit money to start a not-for-profit organization that promotes folk musicians and revives interest in the folk and traditional forms of music in America.She invites people to fund the business project and she states that donors will be honored on the organization's website.She sets a six-month goal to raise the money.Keri is using which of the following forms of financing?

A) angel investors
B) business incubator
C) threshold pledge system
D) fund and release system
E) crowdfunding

Question 74

A corporation's first offering of shares of stock to the public is called ________.

A) a public options proposal (POP)
B) a secondary stock offering (SSO)
C) a secondary equity offering (SEO)
D) an initial public offering (IPO)
E) an inaugural funding foray (IFF)

Question 75

Which of the following is a business oriented service that helps business owners raise money to launch or expand companies?

A) CashKing
B) MoMoney
C) Kickstarter
D) Crowdfunder
E) StartUpDaddy

Question 76

Celera Inc.,a soap manufacturing firm based in Colorado,needs to raise capital to fund its product development plans.The firm decides to offer its shares of ownership to the public for the first time,and lists its securities on a public exchange.This is termed as ________.

A) a private placement initiative (PPI)
B) a secondary market offering (SMO)
C) a secondary equity offering (SEO)
D) an initial public offering (IPO)
E) an international funding foray (IFF)

Question 77

Which of the following is a major difference between banks and venture capitalists as categories of private financing?

A) Unlike banks, which recruit investment specialists, venture capitalists are private investors without any specialized investment skills.
B) Unlike banks, which provide investment for high-risk businesses, venture capitalists won't lend money to a start-up that hasn't established a successful record of accomplishment.
C) Unlike banks, which don't require collateral, venture capitalists provide investments only when an entrepreneur puts up marketable collateral.
D) Unlike banks, which only provide money, venture capitalists also provide management expertise.
E) Unlike banks, which are extremely focused and selective in giving loans, venture capitalists are less focused and provide loans to a large number of start-ups.

Question 78

A(n)________ enables the buyer to use a larger company's trade name and sell its goods or services in a specific territory.

A) trademark
B) franchise
C) initial public offering
D) open source contract
E) network effect

Question 79

A ________ is a legally binding contract that defines the relationship between a franchisee and a franchisor.

A) franchising prospectus
B) franchise agreement
C) business agreement
D) franchisor's declaration
E) contractual understanding

Question 80

Money used or needed to set up a new business is ________.

A) an incubator fund
B) seed money
C) an initial public offering
D) public financing
E) an advisory board loan