Small Business Management Chapter 1

The industry that employs the greatest number of people in small business is which of the following? a. construction b. manufacturing c. retail businesses d. services

d. services

What percentage of businesses in the service sector are small? a. 71 percent b. 51 percent c. 31 percent d. 11 percent

a. 71 percent

Industry classification codes that are based on annual sales revenue or number of employers are abbreviated as ______. a. NAICS b. SIC2 c. NAIA d. NCAA

a. NAICS

Which of the following are the inherent factors that work in favor of small businesses? a. ability to remain flexible and innovative b. management expertise c. emphasis on variety d. emphasis on quantity

a. ability to remain flexible and innovative

The lifeblood of any new small business is which of the following? a. cash b. a large target market c. a customer base d. a quality product/service

a. cash

Until the early 1800s, most goods were produced ______. a. by small manufacturers b. by workers in their cottages c. by large factories d. by large groups of workers in the town hall

b. by workers in their cottages

According to the U.S. Census Bureau, approximately ______ of closed businesses were successful at the time of their closure. a. one-quarter b. one-third c. two-thirds d. three-quarters

b. one-third

What startup business of the 1960s used flatter organizational structure, improved customer service, and more flexibility to knock Sears out of its role of world's largest retailer? a. K-Mart b. Woolco c. Wal-Mart d. Target

c. Wal-Mart

The process of creative destruction involves which of the following? a. the destruction of current products b. the replacement of current products c. the innovation of new products d. the replacement of existing products with new and better products

d. the replacement of existing products with new and better products

NARRBEGIN: 1-1 Scenario 1-1. Larry Linsuine is thinking of marketing a new idea he has been using. After years of experience as a deer hunter, he has perfected a tree stand that gives him an added advantage in deer hunting. He calls his new tree stand The Tree Hugger. He has now begun the process of manufacturing his tree stands with 20 employees working out of his garage. His life savings have provided the equity for his operation. NARREND In Scenario 1-1, what advantage will Larry have over his competition with his new product? a. competitive advantage b. comparative advantage c. qualitative advantage d. financial advantage

a. competitive advantage

Sam closed the doors to her home-based consulting company only two years after opening because she was tired of working 80-hour weeks. This is an example of which mistake leading to business failure? a. failing to understand the level of commitment required b. neglecting to plan c. not using employees effectively d. mishandling finances

a. failing to understand the level of commitment required

NARRBEGIN: 1-2 Scenario 1-2. Franky Ferguson has just reached a turning point in his business. He can no longer retain quality employees because he cannot meet his payroll, he does not have an adequate cash flow to pay his current bills, and he is three months behind in his loan payment to the bank. He must close the doors of this business. NARREND In Scenario 1-2, what is the primary reason Franky has failed? a. inadequate management b. lack of a quality product c. no target market d. inadequate advertising

a. inadequate management

NARRBEGIN: 1-1 Scenario 1-1. Larry Linsuine is thinking of marketing a new idea he has been using. After years of experience as a deer hunter, he has perfected a tree stand that gives him an added advantage in deer hunting. He calls his new tree stand The Tree Hugger. He has now begun the process of manufacturing his tree stands with 20 employees working out of his garage. His life savings have provided the equity for his operation. NARREND In Scenario 1-1, what will be the most difficult problem that Larry will encounter? a. obtaining sufficient cash b. finding a target market c. obtaining accurate information d. deciding upon appropriate advertising media

a. obtaining sufficient cash

Big business competes based on mass production and, thus, lower prices. Small business can compete based on ______. a. personalized services and products b. lower prices than big business can offer c. quality d. accessibility to large amounts of capital

a. personalized services and products

The chemical producer, Hoechst Celanese, found that diversity in the work force was particularly beneficial in which area? a. problem solving b. reaching a consensus c. exploring one point of view d. downsizing

a. problem solving

Inventing a new way to organize physical inputs to produce a product or service refers to ______. a. process innovation b. product innovation c. service innovation d. management innovation

a. process innovation

The most common types of innovations produced by small business relate to ______. a. service and products b. manufacturing c. management techniques d. new resources offered by financial institutions

a. service and products

Which percentage of small businesses are actually forced out of business with financial loss to creditors? a. 10 percent b. 20 percent c. 50 percent d. 75 percent

b. 20 percent

John Deere relies on hundreds of vendors to produce component parts for its farm equipment. This illustrates which secret of small business success? a. Small businesses have competitive advantage over large businesses. b. A symbiotic relationship exists between small and large businesses. c. Small businesses perform more efficiently than larger ones. d. Small businesses are able to innovate more easily than larger ones.

b. A symbiotic relationship exists between small and large businesses

You have a small business that offers printing services. One of the services you offer is a high-speed color copier. You are currently the only printing service in a tristate area that offers such a service. You currently have ______. a. creative destruction b. a competitive advantage c. a qualitative advantage d. a capital advantage

b. a competitive advantage

A partnership that is restructured or a business that moves to a new location is considered to be which of the following? a. business failure b. business termination c. business success d. business venture

b. business termination

The term economy of scale refers to which of the following? a. Increasing costs through the production of larger quantities. b. Decreasing costs through the production of larger quantities. c. Decreasing costs through the production of smaller quantities. d. Increasing costs through the production of smaller quantities.

b. decreasing costs through the production of larger quantities

In order to take advantage of economies of scale, large businesses usually ______. a. devote resources to produce selected quantities of products b. devote resources to produce large quantities of products c. devote resources that are committed for only short time periods d. devote resources that are able to quickly respond to a changing market

b. devote resources to produce large quantities of products

NARRBEGIN: 1-2 Scenario 1-2. Franky Ferguson has just reached a turning point in his business. He can no longer retain quality employees because he cannot meet his payroll, he does not have an adequate cash flow to pay his current bills, and he is three months behind in his loan payment to the bank. He must close the doors of this business. NARREND In Scenario 1-2, the valuable skills and knowledge that Franky's employees possessed is known as ______. a. financial capital b. intellectual capital c. monetary capital d. knowledge capital

b. intellectual capital

Linda Waters, a chemical engineer at a large pharmaceutical company, has lead a team to develop a new drug that effectively treats the common flu faster than any other drug on the market. This is an example of what type of innovation. a. process innovation b. product innovation c. service innovation d. management innovation

b. product innovation

The incentive for innovation of new ideas and products is generally strongest for ______. a. research and development divisions of large companies b. small businesses c. government-funded research laboratories d. colleges and universities

b. small businesses

The stronger and more sustainable the competitive advantage a small business maintains, the better the chances of ______. a. guaranteeing a profit b. winning and keeping customers c. obtaining a loan from a bank d. entering the international market

b. winning and keeping customers

What is the annual revenue currently generated by Hispanic-owned businesses? a. $700 billion b. $150 billion c. $222 billion d. $39 billion

c. $222 billion

Although Small Business Administration (SBA) standards allow up to 500 employees in some types of businesses, the most common limit is ______. a. 10 b. 50 c. 100 d. 200

c. 100

The number of people who make small business their primary occupation is which of the following? a. 2 million b. 6 million c. 12 million d. 25 million

c. 12 million

Since 2002, the share of women owning their own business increased by what percent? a. 10 b. 20 c. 38 d. 50

c. 38

Large telecommunications companies have an incentive to improve existing lines of products and services to better serve their customers, rather than invent new products. This best demonstrates what aspect of innovation in business? a. Research and development departments in large company's fuel innovation. b. Compared to larger companies; small businesses are not financially equipped to innovate. c. Real innovation tends to come from independent inventors and small businesses. d. Large companies are too inflexible to handle real innovation.

c. Real innovation tends to come from independent inventors and small businesses

The marketing concept was a paradigm shift that involved ______. a. a focus on production b. a focus on quality c. a focus on consumer wants and needs d. a focus on marketing

c. a focus on consumer wants and needs

Allen Campbell's small tire business has recently closed due to credit foreclosure. This is an example of ______. a. voluntary withdrawal b. bankruptcy c. business failure d. adequate management

c. business failure

The ability to offer greater value than one's competitors is called which of the following? a. quality b. reduction in the price charged c. competitive advantage d. qualitative advantage

c. competitive advantage

What percentage of net new jobs do small businesses create annually? a. from 10 to 25 percent b. from 40 to 50 percent c. from 60 to 80 percent d. from 85 to 100 percent

c. from 60 to 80 Percent

A common cause of business failure is ______. a. choosing the wrong type of business ownership b. starting a business that is too large c. industry weakness d. specialized management knowledge

c. industry weakness

NARRBEGIN: 1-1 Scenario 1-1. Larry Linsuine is thinking of marketing a new idea he has been using. After years of experience as a deer hunter, he has perfected a tree stand that gives him an added advantage in deer hunting. He calls his new tree stand The Tree Hugger. He has now begun the process of manufacturing his tree stands with 20 employees working out of his garage. His life savings have provided the equity for his operation. NARREND In Scenario 1-1, what type of business is Larry beginning? a. large business b. joint venture c. small business d. none of these

c. small business

William Smith works for an automobile company that generates an annual revenue exceeding $200 million, but accounts for less than one percent of the global automobile market. Based on this information, the company that William works for would be considered a ______. a. conglomerate b. corporation c. small business d. franchise

c. small business

Intellectual capital is the skill and knowledge possessed by ______. a. the small business owner b. the small business consultant c. the small business employees d. the banker for a small business

c. the small business employees

SBA 8(a) certification provides preference in bidding on federal and state contracts to ______. a. women only b. minorities only c. women and minorities d. first-generation Americans

c. women and minorities

Ronald Meese is the owner and operator of Meese Mining. To be considered a small business for crediting purposes, what is the maximum number of employees that Ronald can employ? a. 50 b. 100 c. 200 d. 500

d. 500

Why has the number of students studying entrepreneurship increased so dramatically since the early 1970s? a. More students wanted to buy this book and take this professor's course. b. The economy has been bad, so no other jobs have been available. c. Marketplace desires change quickly. d. More small businesses are being formed and the cost of mistakes is higher.

d. More small businesses are being formed and the cost of mistakes is higher

A business failure occurs when a business closes for any of the following reasons except ______. a. bankruptcy b. a reorganization c. a receivership d. a merger

d. a merger

A business failure occurs when a business ______. a. closes because of retirement by the owner b. is sold c. closes because of lack of demand for the product d. closes with financial losses to creditors

d. closes with financial losses to creditors

Small businesses are more able than big businesses to perform efficiently in which of the following areas? a. management b. higher profit margins c. fewer expenses d. distribution

d. distribution

The most valuable asset a small business owner has is ______. a. a quality product b. buildings and equipment c. a good relationship with his/her banker d. employees

d. employees

The valuable skills and knowledge that employees of a business possess are collectively called ______. a. business assets b. tangible inventory c. outsourcing d. intellectual capital

d. intellectual capital

The most common cause of business failure is ______. a. choosing the wrong type of business ownership b. starting a business that is too large c. lack of marketing expertise by the small business owner d. lack of management experience

d. lack of management experience

Creating a new way to organize a business's resources involves ______. a. process innovation b. product innovation c. service innovation d. management innovation

d. management innovation