FINC 3620 Exam 1

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6. List some triggers that push people into starting a new business.

Being laid off, being approached with a new business idea, having little financial failure risk, midlife crisis, reading a book that spurs a decision.

2. Name several entrepreneurs who have grown their businesses into major organizations.

Facebook, LinkedIn, Apple, HP, Best Buy, Ford, General Electric, Virgin, Ralph Lauren, Kroger, Home Depot, Walmart, Estee Lauder, Oprah, businesses in the book The Millionaire Next Door

2. Why is founder involvement in a new venture so critical to its success?

Founder involvement is important because they care the most about the venture and have channeled resources towards it, and are arguably the most informed about the product or business they are in.

4. How have entrepreneurial businesses impacted the growth of the United States?

GNP is the gross national product rate. New and growing businesses contribute heavily to this number in the US. Many multinational firms shut down and made room for more entrepreneurial businesses in the US, which has been responsible for the innovation of the US.

5. Why does "profit as a goal" present an ethical challenge to new business owners?

Milton Friedman studied the goal of businesses. It is believed by many that businesses have a larger role in society and that is to contribute in bettering that society for employment, using and creating resources, and supporting the community how they can. It is not just about profit and putting this at the center of your business model can fog decision-making.

5. How do you think personality differences matter in the starting of a business?

People have different histories and backgrounds that can cause them to be bounded by different things. Personality can affect decision making as well. It is important to understand your strengths and weaknesses as well as potential partners' personality traits.

How do entrepreneurial businesses impact the economy?

Small businesses drive the economy because many large corporations start small and grow to become what they are now. 54% of US sales come from small businesses in the United States, showing how big of a player they are in the economy. They also employ 55% of all jobs in the US and occupy around 40% of commercial land.

1. How does the lack of "slack" resources impact new ventures?

The new firm has little flexibility when responding to emergency circumstances like hiring new employees if they lose individuals.

3. Explain what it meant by the science and the art of starting and managing a business.

The science of entrepreneurial business means that is has practical application and is well grounded in research. The art is how the ideas are practiced and the skills of the business owner(s). These two go hand in hand with starting and managing a business and the success that business will have.

3. Is there some minimum level of risk tolerance required to start a business? Explain.

There is no set level of risk tolerance when going into a business; it is all very personalized to that individual. Their tolerance of risk must be established and consistent with their background. Some say that don't do anything that will cause them to lose sleep at night.

4. How does bounded rationality affect the way an entrepreneur determines what type of business to start?

They use their background and history to decide what business to start, how to solve problems, and important decision-making. Understanding how the individual is bounded rationally will help them develop their business better.

6. What differentiates an entrepreneurial business from one that is a venture-backed business?

Venture capital start-ups are different from entrepreneurial businesses because they formed with a harvest plan, which is a strategy that allows them to exit the businesses once venture capitalists decide to sell it, etc. They grow quickly and have a developed structure. They also tend to have multiple locations right after the initial investment while employing a large number of employees.


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