Ch 5 Adaptive Test Prep- Principles of Business

Fran's Fancy Frocks, a retail clothing store, may not exceed ___ in annual sales to qualify as a small business.

$7 million

There are approximately ___ businesses in the United States.

28 million

All of the following are true about small business except: 1) small businesses provide employment. 2) small businesses bounce back faster after an economic downturn than large businesses. 3) small businesses create cyclical unemployment. 4) small businesses fill the needs of society and other businesses.

3

Jennifer and Raleigh are considering starting a small business and are weighing the pros and cons of doing so. Which of the following would not be a good reason to start a small business? 1) Desire to determine one's own destiny. 2) Desire to create something new. 3) Desire for guaranteed financial return. 5) Desire for independence.

3

Jennifer would like to open her own business. According to the SBA, in 2017 women were 51 percent of the U.S. population, and owned at least ___ percent of all small businesses.

36%

For Jerry's Automobile Parts Fabricating business to qualify as a small business by the Small Business Administration, it can employ no more than ___ people.

500

Pick the correct phrase from the following that best characterizes the relationship between franchisors and franchisees.

Disagreements between the two parties have increased and contract disputes are causing many lawsuits.

Craig has $60,000 to invest in a new small business. He wants the business to succeed. He has read about the success rates of franchises and the success rates of start-up businesses. Which of the following statements most accurately describes the success rate of franchises?

Franchises have a very high success rate compared to other small businesses.

Leena graduated from high school but has not taken any business courses. She opened her own Scandinavian goods store which makes enough in sales to keep the doors open, but she is having difficulty managing the store. She has a vision for the store, but she is having difficulty dealing with all of the government agencies, licensing, employee demands, and business promotion. She has come to you for advice about where to get the resources she needs for her business to thrive. Which of the following is the most likely solution to her problem?

She could contact the SBA and enroll in one or more of its business management programs.

Maria has purchased a Subway franchise. About how much work should she expect to do to be successful as a franchisee?

She will work very hard, putting in long hours about six days a week.

Adamaris and Britney recently moved their small computer design company into an industrial building. They have filed for a patent on their latest invention and are working on two others. Which of the following statements is correct regarding small business and technical innovation?

Small firms produce two-and-a-half times as many innovations as large firms relative to the number of persons employed.

What is the primary disadvantage of owning a franchise experienced by a franchisee?

The franchisor still maintains a great deal of control.

A(n) ____ is a carefully constructed plan for an individual starting a business.

business plan

Leticia has always wanted to own her own restaurant but has read that restaurants have a very high failure rate. To increase her chances of success she should consider

buying a franchise of a well-established restaurant.

Samantha would like to get a small business loan from the SBA. What is the largest guaranteed loan she could be granted?

$2.0 million

Stuart has $50,000 to start a new business. This is higher than _____, the amount the Census Bureau and Federal Reserve say 50 percent of all new businesses begin with.

$30,000

Freddie's Fenders is seeking a loan from the SBA. If he seeks the average-size SBA-guaranteed business loan he will borrow

$300,000

In order to operate a successful small business, the entrepreneur should be most concerned with

capital and management skills

Brenda has a small grocery store in a residential neighborhood where she primarily sells staples to the people who live in the area. Which of the following best describes the industry she operates in?

distribution

Characteristics of a small business would include all of the following except

dominant in its field

You stop by a Carl's Jr. fast food restaurant and notice that they also have Green Burrito Mexican food. This is an example of a

dual-branded franchise

Sylvia has an SBA-guaranteed business loan for the average life of such loans. How many years will she have to repay the loan?

eight

Franchisors benefit from the franchise agreement because they have

fast and selective distribution of products

Matilda would like to open an ice cream and sweet treats store but she will need a loan to do so. She is concerned she may not be given a loan and researches the subject, discovering that in 2017, the SBA data showed that women-owned businesses are

financially sound and credit-worthy.

Mary's Models is a successful model airplane store. It is so successful that she has decided that, for a fee, she will allow others to use her business name, materials, and methods in operating their own business. Henry approaches her about operating his own business under the terms above. What is the name of the business agreement Henry would sign?

franchise agreement

Reno decides to purchase and operate a McDonald's restaurant. Reno is a

franchisee

Ellis owns a Subway franchise. Where is Ellis most likely to go for advice and guidance about running the outlet?

franchisor

Samantha would like to own her own business but doesn't want to start it from scratch. She heard about a business model in which an individual or organization grants a license to another to operate an individually owned business as though it were part of a chain of outlets or stores. The party granting the license is the

franchisor

The most common form of franchising today is one in which a

franchisor supplies brand names, techniques, or other services instead of a complete product.

Small businesses have an advantage over large businesses in all of the following areas except

greater potential for making a profit.

Leticia would like to start a business and has investigated starting her own or buying a franchise. Which of the following is an advantage to purchasing a franchise?

guidance from the franchisor

Richard has a motorcycle and ATV store. His customers often talk about trikes. Richard orders some Harley-Davidson Trikes for his inventory. His actions are possible because small businesses

have the ability to quickly adapt to change

Brent and Wendy plan to open a new business. They meet with a business planner who helps them compile a business plan. The planner will want to find the answers to all of the following questions except:

how often the business will have sales?

Barrack opens a bagel shop and at the end of each day has five dozen bagels left over that he cannot sell the next day due to health code restrictions. He has misjudged

inventory

Small firms usually sell parts and assemblies to large firms because the large firms have found that

it is less expensive than making their own.

Sarah has opened her own cosmetology business in a small shopping center with a lot of foot traffic. It is most likely that

it may take several years for this business to begin to show a profit.

When Reno purchases the McDonald's she will be expected to supply

labor and capital, and will own and operate the outlet.

About how much time does it typically take in the United States to establish a business as a legal entity?

less than a week

A wholesaler purchases products in quantity from _____ and then resells them to retailers.

manufacturers

Godfrey has just graduated from business school and is seeking employment. He is considering applying to small firms because he knows that small businesses have traditionally added _____ new jobs to the economy.

more than their proportional share of

Because of disputes between franchisors and franchisees, a program was instituted to arbitrate them. What is the name of that program?

national franchise mediation program

Increases in productivity for the past 200 years are characterized by

new ways to do a job with less effort and at a lower cost.

Jimmy and Henry are considering opening a smoke shop. They have heard that the disadvantages of small businesses include all of the following except: limited advancement opportunities for employees. limited ability to raise capital. a high risk of failure. no opportunity to support your family.

no opportunity to support your family

The SBA assists small-business owners entering the world markets by doing all of the following except

offering long-term loans to U.S. business owners.

Which of the following small businesses could be categorized as being in the distribution industry?

retail

Automobile dealerships and ___ were the primary uses for franchises in the early days of franchise agreements.

service stations

Zully has obtained an SBA loan to start a new business in her town. She has an arrangement with Ford Motor Company to be the exclusive seller of Ford vehicles. She has used the SBA loan to purchase this dealership, purchase land, build the dealership buildings, and pay for all of the initial advertising. What is the most likely form of business she has adopted for this company?

she most likely has a manufacturing franchise

Studies have shown that the incidence of innovation among small-business workers is ___ among workers in larger businesses.

significantly higher than

Frieda's Freestyle Skateboards has many customers but is not dominant in its field. This is a ___ business.

small

Terry's Tires made just under $750,000 last year, according to the Small Business Administration. Terry's is a

small business

The business that represents 99.9 percent of all employers in the United States is a

small business

In the United States, ___ account(s) for 97.7 percent of all identified exporters and produce(s) 33 percent of export value.

small businesses

Business students at universities can work together to provide management counseling to small businesses in their community. This program is part of the

small-business institute.

Anastasia has started a dry cleaning business but is having difficulties with various aspects of organizing and operating the business. Which of the following organizations would most likely give her the help she needs?

small-business institutes

Milkshake Lending Company is a small privately owned firm providing venture capital to small businesses. This company could also be referred to as a

small-business investment company.

Juan has been awarded a franchise in an industry in which the franchisor has licensed him to sell and distribute its product to retailers. Juan is most likely a franchisee in the ___ industry.

soft-drink

Which of the following businesses would most likely be included in the production industry?

subassembly plant

The franchise with the most outlets in the United States is

subway

Darrel's Donuts has been operating quite successfully for two years. Darrel is considering expanding the business by franchising. Which of the following is not an advantage of a franchise?

success will cause another outlet to be opened nearby

The invention of insulin and power steering by small businesses are examples of the ability of small businesses to provide

technical innovation

High-tech ___ entrepreneurship is exploding.

teen

Joyce worked for a large printing company for two years where she was paid well, then quit to take a job at a small sole proprietorship printing company. One of the main reasons she may have made the move was

the ability to build personal relationships with the owners and other employees.

Hamilton has wanted to start a business of his own since he was a small child. This desire is referred to as

the entrepreneurial spirit

The majority of small businesses are managed by

the people who start and own them

Jeff Katz, the founder of Orbitz, Inc., when speaking about new businesses recently said, "A flat checkbook is the mother of invention." He was referring to

the reality that small-business workers are more innovative than workers in large businesses.

Genesis and Iziegbe are having a mother-daughter day together. Iziegbe took Genesis to Burger King for breakfast followed by a massage at Massage Envy, a fruit drink at Juice It Up, and getting nails done at Red Persimmon. They finish their day with frozen yogurt from Yogurtland. What do these businesses have in common?

they are franchises

Money invested in small, new, or struggling firms that have the potential to become very successful is called

venture capital

SCORE is the acronym for

Service Corps of Retired Executives

Very Big Corporation builds custom hot tubs and spas, provides hot tub and spa maintenance, and sells hot tub and spa parts and accessories. It is the most diverse hot tub and spa builders, part provider, and service business in Jackson Hole, Wyoming. The company has twelve employees in Jackson Hole. Baileys Spas sells and installs prefab hot tubs and spas. It has five employees. In Hot Water, a hot tub and spa business, cleans and services hot tubs and spas and has three employees. Mr. Bubbles sells hot tub and spa parts and accessories. It has three employees. What is the likelihood that these small businesses can effectively compete against Very Big Corporation?

A number of small firms, each competing in its own particular area and its own particular way, together have the desired competitive effect to challenge large firms.

Steven trained horses to do tricks. To prove his skill in horse training, he adopted a wild horse from the Bureau of Land Management that had never been handled by anyone. Steven trained the horse to be totally obedient and to perform several tricks. He took the horse to a horse show to prove that disobedient horses are not incorrigible, they are just poorly trained. Following the show, he was approached by several spectators and asked for his contact information so they could have him train their horses and refer others to him. Steven had business cards printed, set up a webpage and social media accounts where he posted horse care tips and short videos of horses doing tricks. The referrals, webpage, and social media sites generated so much business that after a year his wife quit her job to work for him. The following year he hired and trained four employees. His business now generates income of $2 million/year and he is considering opening in other locations. Which of the following is true about Steven's business?

According to the Small Business Administration, he has a small business.

As a class assignment, business students were told to prepare a business plan for a business they would like to own. Which of the following is something that would not be included in the plan?

Government regulations.

A potential franchisor is concerned that the franchisees will destroy the reputation of the company and end up hurting his business. Which of the following should he use to protect his interests?

He can ensure that the new stores are operated according to his own standards through the franchise agreement.

Bill has his own tax preparation and accounting business. He works many hours from January through April, but in May takes a month-long vacation and the rest of the year works part-time. What advantage of a small business does Bill enjoy?

Independence

Which of the following is an advantage to the franchisee?

It is possible to start a business with limited capital.

Joshua, age 15, knew several professional tennis players who had several tennis rackets and extra tennis gear that had been given to them by their sponsors. They did not use them because they had all they could use. He contacted the tennis players and bought the extra rackets and gear from them. He resold the rackets and gear to individuals through his web page. He saved most of his money and when he had enough money to lease a building, he leased a storefront on a busy street and made it into a sporting goods department store. When he was generating sufficient income from the store he began importing goods from other countries and added these to his sporting goods offerings. He invested his profits in energy stocks which returned a large gain and gave him the ability to start other businesses. By the age of 30, Joshua was a multi-millionaire. In a recent interview, he said he determined at an early age that he would only work for himself and had wanted to have his own business all of his life. Which of the following best describes Joshua?

Joshua is an entrepreneur

Marilyn and Macy are arguing about the primary financial function of the Small Business Administration. Marilyn argues that the SBA's primary function is to lend money. Macy argues that its primary function is to guarantee loans. Who is correct?

Macy because the SBA's primary financial function is to guarantee loans.

Jack owns a franchise. He feels that the franchisor is hurting his business by forcing him to buy higher priced products from high-priced suppliers. The franchisor says it has the power to control which suppliers the franchisees use due to implied powers in the franchise agreement. Which of the following agencies will most likely arbitrate this dispute?

National Franchise Mediation Program

What are the typical payments paid by a franchisee to a franchisor?

One-time franchise fee and monthly royalties based on sales.

Molly has owned a small bakery in Napa for several years. The bakery offers breakfast, lunch, coffee, and a wide variety of pastries, breads, cakes, and pies. All breads and pastries are made on the premises. Molly has several regular customers who eat at the same time on the same days each week. One week, she read in the newspaper that one of her regulars had been injured in a car accident. When the regular's breakfast companion went to the bakery for breakfast alone, Molly gave him a basket of baked goods from the store to take to the injured patron. When a fire threatened the city, she made pots of coffee and baskets of baked goods and took them to the firefighters' staging area. Which of the following best demonstrates Molly's relationship with her customers and community?

Owners of small businesses get to know many of their customers by name and deal with them on a personal basis. Through such relationships, small-business owners often become involved in the social, cultural, and political life of the community.

Portica knows the customers of her hat shop by name and knows each of their preferences. What small business advantage does this demonstrate?

Personal relationships with customers

An organization created by Congress in 1953 to help, counsel, and protect small business is known as the

SBA

Drake has always had difficulty with numbers and never took accounting courses. After two years in business, he is afraid that his books are in such disarray that he will be audited by the IRS and be unable to prove his income and expenses. He has read about the SBA SCORE Association and would like to have a SCORE volunteer mentor him. Which of the following most accurately describes SCORE services?

SCORE personnel provide services to small businesses through the SBA.

D'Anton owns a fast food business and takes great pride in its appearance, cleanliness, and customer service. One morning, an individual wearing a badge that identified him as an inspector entered the business and asked permission to inspect. Without hesitation, D'Anton permitted him to inspect. The individual was not from any government agency. What is the most likely explanation for D'Anton's actions?

This is a franchise and the franchisor has sent its inspector to ensure the business is operated according to the franchise license.

Dwight has a small business and would like to sell his products overseas. Which of the following organizations can assist him?

U.S. commercial service

Jeremy has written a business plan for the business he would like to open. He states in the plan, "This business will serve over 400 customers by the end of the year and employ ten full-time employees." Which major question in his business plan does this statement address?

What are the goals for the business?

The Small Business Administration offers many courses to individuals interested in going into business or improving his or her business. The most popular SBA course is

a course that surveys eight to ten areas of business management.

A business seeking a loan through the Small Business Administration will actually be given a loan through

a private lender

Independence and a desire to determine one's own destiny are some of the entrepreneurs' personal factors in small-business success, others include:

age and family background

Companies that invest in small businesses

are profit-making organizations

One of the special focus areas of the SBA is to

assist minorities wanting to start or expand small businesses.