Deck 5: Small Business, Entrepreneurship, and Franchises

Question 1

Small businesses account for all nongovernment employment.

Answer 1

False

Question 2

Franchising is a win-win combination; both franchisees and franchisors are guaranteed success.

Answer 2

False

Question 3

John Wells, an African-American small business owner, might be eligible for a grant from the Minority Business Development Agency.

Answer 3

True

Question 4

Entrepreneurial spirit is the desire to create a new business.

Question 5

A new business is built around the entrepreneur.

Question 6

About one-third of franchised businesses fail during the first two years of operation.

Question 7

Service industries make up about 48 percent of all small businesses.

Question 8

The business plan should deceive neither investors nor loan officers and should convey accurate and realistic expectations of business potential.

Question 9

Because of small-business competition, large companies must become more efficient and responsive to consumers' needs.

Question 10

The SBA's website resource targeted at assisting women-owned business is known as the SBA's Online Women's Resource and Growth Center.

Question 11

The SBA has defined a small business as one independently owned, operated for profit, and not dominant in its field.

Question 12

Small businesses are prone to failure.

Question 13

The average length of an SBA loan is about twenty-five years.

Question 14

Franchising is limited only to fast foods.

Question 15

The main reasons small businesses fail are poor management skills on the part of owners, inadequate capital, and poor planning.

Question 16

In a franchise, the franchisee gets the opportunity to start a business with limited capital and to make use of the business experience of others.

Question 17

An investor who is considering investing in Diane's Burger Bar would not likely want to see her business plan.

Question 18

Small firms have traditionally added more than their proportional share of new jobs to the economy.

Question 19

A license to operate an individually owned business as though it were part of a chain is a franchise.

Question 20

Society usually does not benefit from entrepreneurs who pursue their individual goals; it is only the entrepreneurs who reap the benefits of their own work and creativity.

Question 21

Small businesses are expected to remain the dominant form of organization in this country.

Question 22

There is much less likelihood of failure with a franchised outlet than with an independently owned small business.

Question 23

According to a government source, more than half of this century's technological innovations came from small companies.

Question 24

International trade will become more important to small-business owners in the new century.

Question 25

For those who like dealing with people, small business is the place to be.

Question 26

The incidence of innovation among small-business workers is significantly higher than that among workers in large businesses.

Question 27

About half of small businesses are in the production industries.

Question 28

Many entrepreneurs lack the management skills required to run a business.

Question 29

Some franchisors claim that contracts are unfairly tilted toward the franchisees.

Question 30

The purchaser of a franchise is called the franchisee.

Question 31

In the past, the SBA could guarantee loans up to $5 million.

Question 32

Small businesses are generally managed by professional managers.

Question 33

The purchaser of a franchise is called the franchisor.

Question 34

The various types of businesses attracting small business are generally grouped into service industries, distribution industries, and financial industries.

Question 35

It is rare that managers of small businesses lack the management skills necessary to run their businesses.

Question 36

Few Americans take advantage of their freedom to start a business.

Question 37

Statistically, one can expect about two out of every three new businesses to fail within six years of their founding.

Question 38

SCORE is a group of retired businesspeople who volunteer their services to small businesses through the SBA.

Question 39

Franchising experienced tremendous growth during the early 1430s.

Question 40

A main disadvantage of a small business is that employees and customers usually develop too close of a relationship.

Question 41

The SBA is a private organization rather than a government agency.

Question 42

Which of the following is not considered a category in the distribution industries?

A)Manufacturing
B)Wholesaling
C)Retailing
D)Transportation
E)Communications

Question 43

A small-business investment company (SBIC) is a government agency that provides venture capital to small enterprises.

Question 44

About three-quarters of all small businesses are in the service industry.

Question 45

Michael Tucker operates Tucker Farms in northern Illinois. Last year, his annual receipts were just under $750,000. According to the Small Business Administration, Tucker Farms is a

A)small business.
B)medium-sized business.
C)large business.
D)franchise.
E)joint venture.Personal Wellness

Question 46

All of the following are advantages that small businesses have except

A)the ability to adapt to change.
B)personal relationships with their customers.
C)simplified record keeping.
D)independence.
E)greater potential for making a profit.

Question 47

Money invested in small firms with the potential to become very successful is known as venture capital.

Question 48

An agreement between two franchisors in which the two franchisors offer their products together is called double franchising.

Question 49

The primary financial function of the Small Business Administration is to

A)lend money.
B)guarantee loans.
C)find sources of financial aid.
D)help owners apply for loans.
E)provide aid only when a natural disaster occurs.

Question 50

Economically, the U.S. government is not concerned with whether or not small businesses make it.

Question 51

Small businesses are typically managed by people who started and own them.

Question 52

The franchisee supplies

A)the required training for the franchised business.
B)a known and advertised business name.
C)a method of doing business.
D)the required materials for the franchised business.
E)labor and capital, and owns and operates the outlet.

Question 53

Angela has been working for a local small business called Personal Wellness for the last three years. It is a retail business that sells sporting goods equipment. When she started to work there, she noticed several things that were possibly the cause of the business not doing as well as it hoped. Angela has been thinking of starting her own small business because she feels she has learned much through working for Personal Wellness.
Angela's manager asked her to create a business plan for Personal Wellness. The manager hoped that this plan would put things into perspective to help the company do better. After creating the plan, Angela suggested that Personal Wellness contact a group of senior and graduate students to provide management counseling for the company. Angela wants to make sure that her leaving does not become the cause of the company going under.
Refer to Personal Wellness. A business plan should answer all of the following questions except

A)"Which accounting firm will audit the company?"
B)"What exactly is the nature and mission of the new venture?"
C)"Why is this new enterprise a good idea?"
D)"How much will the new venture cost?"
E)"What are the entrepreneur's goals?"

Question 54

Small businesses operate only in the service industry, not in manufacturing.

Question 55

Money that is invested in small and sometimes struggling firms that have the potential to become very successful is called

A)seed money.
B)franchise funds.
C)SBA-guaranteed loans.
D)growth funds.
E)venture capital.

Question 56

The Hamptons enjoy owning and operating their own restaurant. They enjoy being the masters of their own destinies and closing down the restaurant for one week a year so that they can take a vacation. The Hamptons seem to enjoy which advantage of a small business?

A)Limited potential
B)Personal relationships with customers
C)Independence
D)Personal relationships with employees
E)Ability to adapt to change

Question 57

Some advantages of the sole proprietorship also apply to the small business.

Question 58

The disadvantages of franchising mainly affect the franchisee because the franchisor retains a great deal of control.

Question 59

Large companies often find it less expensive to purchase parts from small companies than to manufacture their own.

Question 60

All franchisors give geographical protection to their franchise holders.

Question 61

In a franchise business, the party paying the franchise fee is known as the

A)franchisee.
B)franchisor.
C)entrepreneur.
D)business owner.
E)manager.

Question 62

Which of the following statements is true regarding the profitability of new businesses?

A)It may take several years for a new business to begin showing a profit.
B)Profitability is not an important issue for new businesses.
C)Most new businesses will turn a profit within the first year.
D)If a company does not show a profit within the first year, it will fail.
E)Most new businesses are highly profitable when they first start.

Question 63

By age 26, Tom was a plant manager in the snack-foods division. By 33, he headed the division, one of the most profitable in the corporation. Eventually, however, the company decided to move its corporate offices. Although he loved the job and thought the work was great, Tom's lifestyle was awful. He was on the road so often that he was giving up much of his family life. Tom had also become disenchanted with corporate life. He saw that the closer one got to the top, the more vulnerable one's position became. Thus, Tom left the corporation to start his own snack-foods company. His thoughts and actions most clearly reveal his

A)entrepreneurial spirit.
B)need for independence.
C)desire to determine his own destiny.
D)willingness to find and accept a challenge.
E)lack of self-confidence.

Question 64

Distribution industries account for approximately what percentage of all small businesses?

A)20
B)25
C)33
D)55
E)70

Question 65

Small businesses are typically managed by

A)relatives.
B)professional managers.
C)friends.
D)the people who start and own them.
E)a board of directors.

Question 66

A guaranteed SBA loan may be as large as

A)$5 million.
B)$3.5 million.
C)$2.0 million.
D)$1.5 million.
E)$750,000.

Question 67

Megan's business sells souvenirs and craft items to tourists in Myrtle Beach, South Carolina. This is an example of a ____ business.

A)service
B)communication
C)production
D)distribution
E)wholesaling

Question 68

Price Waterhouse, a large accounting firm, would be most properly classified in the ____ industry, whereas a grocery store such as Kroger would be included in the ____ industry.

A)distribution; production
B)service; distribution
C)production; service
D)service; production
E)distribution; service

Question 69

All of the following are disadvantages to the franchisee except

A)a loss of control.
B)continuing royalty fees.
C)hard work.
D)a fee for advertising.
E)starting a business with limited capital.

Question 70

Beau works for a small pest-control company that has a total of five employees. From his point of view, the primary disadvantage of a small business is the

A)risk of failure.
B)limited ability to raise capital.
C)limited potential for him to advance.
D)personal relationship with his employer.
E)complicated management structure.

Question 71

Which of the following is the most likely example of a production industry?

A)Telephone company
B)Movie theaters
C)Financial enterprise
D)Subassembly plant
E)Transportation company

Question 72

The SBA is offering to help the nation's small-business owners enter world markets. SBA assistance includes all of the following except

A)counseling on how to enter markets overseas.
B)counseling on where to enter markets overseas.
C)matching U.S.small-business executives with potential overseas customers.
D)bringing small U.S.firms into direct contact with potential overseas buyers and partners.
E)offering long-term loans to U.S.business owners.

Question 73

Ben has been thinking about going into business. However, he has discounted entering automobile manufacturing because it

A)requires little skill and knowledge.
B)is not a part of the production industry.
C)requires huge investments in machinery and equipment.
D)is unprofitable.
E)requires by law a corporate form of business.

Question 74

Dana owns and operates a catering business. This is an example of a

A)distribution business.
B)production business.
C)service business.
D)retailer.
E)manufacturer.

Question 75

What is the most popular course offered by the SBA?

A)A "How to Get Rich Quick" course
B)A course about accounting for a small business
C)A course that surveys eight to ten areas of business management
D)A course on motivating and encouraging your employees
E)A course on how to obtain more financing for your business

Question 76

All of the following are reasons people go into business except the

A)desire to create a new business.
B)willingness to accept a challenge.
C)guaranteed return on investment.
D)desire for independence.
E)desire to determine one's own destiny.

Question 77

Lauren starts a business that sells personal computers. Within the first year she discovers that computer technology becomes outdated very quickly, and she has not been able to sell her products for as much as she thought due to the passage of time. Lauren has mismanaged

A)inventory.
B)cash flow.
C)financing arrangements.
D)personnel.
E)money.

Question 78

An individual or organization granting a license to operate an individually owned business as though it were part of a chain of outlets or stores is a(n)

A)franchise.
B)franchisor.
C)franchisee.
D)venture capitalist.
E)entrepreneur.

Question 79

Which of the following organizations would be considered a small business?

A)Producer of semiconductors with 2,000 employees
B)Wholesaler with 50 employees
C)Retail clothing store chain with annual sales of $26 million
D)Construction company with average annual receipts of $32 million
E)Farmer with annual receipts of $10 million

Question 80

Chelsea is about to purchase a Baskin-Robbins franchise because she loves ice cream. How much work should Chelsea expect to have to do to make the franchise successful?

A)Most franchisees simply hire managers to run the operations, so she will have to work very little.
B)She will need to work about twenty hours a week to make sure things are running smoothly.
C)She should expect to work very hard, putting in long hours about six days a week.
D)She will have to work a standard forty-hour work week, just as she did at her previous corporate job.
E)Her franchising agreement likely requires her to be at the store whenever it is open.