World of Business Chapter 5

185. The U.S. government's Immigration Act of 1990: A. encouraged entrepreneurs to come to the U.S. through "investor visas." B. established a government program to teach American workers displaced by immigration how to start their own businesses. C. established guidelines to help entrepreneurs recruit legal aliens as a source of low-cost labor. D. proposed an exchange program for American and European entrepreneurs to temporarily live internationally in order to open up foreign branches for their businesses.

A

215. Small businesses: A. deal with similar management issues that large companies face. B. deal with very different management issues due to the very different management challenges experienced by small businesses. C. do not seek government funding due to the fact that the federal government has made it very clear that it must support large operations before small operations. D. concern themselves with state-of-the-art information and accounting technology but not employee relations due to their challenge to financially support employee benefits programs.

A

255. Bankers and potential investors are likely to read ___________ first. A. the executive summary B. the marketing plan C. the qualifications of the management team D. the analysis of the competition

A

271. A(n) ____________ is a valuable source of information regarding techniques to reduce a firm's exposure to risk. A. insurance agent B. accountant C. liability assessor D. union business agent

A

296. One of the hurdles small businesses face when deciding to export is: A. financing is often difficult to find. B. overseas buyers prefer dealing with large corporations. C. smaller companies must wait in line after large companies to qualify for tariffs. D. American products are perceived as inferior.

A

308. Peppy has inquired about the possibility of obtaining a microloan from the SBA. This type of loan is awarded primarily on the basis of the: A. borrower's integrity and the soundness of the business idea. B. amount of collateral the borrower can pledge. C. borrower's credit history and record of previous business success. D. age of the borrower, since only senior citizens qualify.

A A microloan from the SBA is awarded on the basis of the borrower's integrity and the soundness of the borrower's business idea.

214. Located at Monsanto's world headquarters, the Nidus Center is a unique ___________ facility. The tenants are biotechnology companies who are at various stages of product development. The agricultural giant, Monsanto, the Danforth Foundation, Washington University-St. Louis, Saint Louis University, and several venture capital firms contribute seed money for these small start-up ventures that receive approval to further develop their ideas at the Nidus Center. A. incubator B. intrapreneurial C. enterprise zone D. micropreneurial

A Incubator facilities offer new businesses in the critical stages of early development low-cost offices, and in this case, laboratory space and shared business services.

193. Effective entrepreneurial teams combine: A. creativity with marketing and production experience. B. venture financing, tax benefits, and production economies. C. scientific abilities, capital investment, and marketing skills. D. risk tolerance, debt financing, and international experience.

A The purpose of an entrepreneurial team is to bring together the skills needed to create, produce, and market a new product.

174. Which of the following U.S. issues does entrepreneurship most directly affect? A. The political process B. The ability to create jobs for others C. Contributions of money to organizations that help people in need D. The ability to influence national macroeconomics polices

B

179. An entrepreneurial team consists of: A. managers with similar skills, abilities, and interests. B. experienced professionals from different areas of business. C. a group of wealthy investors who share a vision for a product. D. representatives from management, labor, and the government who work together to solve a company's problems in a creative way.

B

184. The goal of an intrapreneur is: A. to improve quality control in a corporation's production process. B. to develop new products and generate new profits for the corporation. C. to implement cost control policies for existing products. D. to create smaller companies within larger companies.

B

250. Two key management functions that need particular attention when starting a business are: A. human relations and accounting. B. planning and financing. C. marketing and public relations. D. staffing and controlling.

B

257. ________ are private individuals who invest their own money in potentially hot new companies before these firms become larger, publicly traded companies. A. Leveraged buyout specialists B. Angel investors C. Venture investors D. Corporate raider investors

B

263. A Small Business Investment Company (SBIC) is a(n): A. agency of the federal government that loans money to high-tech firms. B. private investment company that is licensed by the SBA to make loans to small businesses. C. private firm that offers loans to small businesses in return for a share of ownership in the firm. D. agency set up by state governments to provide managerial advice and support to small businesses.

B

224. Using the analogy of boulders vs. sand for filling a hole, the textbook points out that: A. small businesses are employing a record number of employees because they have to work twice as hard at producing the same amount of output as a large competitor. B. small businesses can serve niche markets that larger firms do not serve well. C. the sand represents the small businesses that start and fail each year, while the boulders represent the large companies whose resources permit them to stay the course. D. large companies serve market niches so much better than small companies.

B There are lots of opportunities and plenty of room for small companies to serve small underserved markets. The boulders represent large firms, who leave a lot of space in the hole which smaller firms represented by grains of sand can fill.

235. Jayne started a small bakery in a resort town. She was certain she had the ideal location, with plenty of hotels and inns within walking distance of her establishment. She planned to use her grandmother's recipes, using only the finest ingredients for her upscale resort customers. During the first week of business, she was disappointed with lackluster sales. When she drove past the regular breakfast-style restaurants and even the Starbucks, she noticed they were rather bustling. Jayne most likely: A. did not publicize in the appropriate places. B. underestimated the competition. C. should have considered weather conditions before assuming that her business would be vibrant. D. did not consider that small businesses never get the name recognition in resort towns that larger businesses and franchises realize.

B Underestimating the amount of competition in your service area is a reason some small businesses falter or fail.

243. Successful small business owners are: A. not good sources for information on starting your own business because they generally do not understand failure. B. valuable sources for information since you can learn from their experiences. C. good but risky since their keen sense of sniffing out something with potential will tempt them to steal your ideas. D. valuable sources of information, but you should proceed with caution because talking with someone who could eventually be your competitor may cross the line due to federal trade commission laws.

B An excellent way to learn how to run a small business is to talk to others who have already done it.

220. When comparing small businesses to their larger competitors, it is clear that: A. bigger is always better. B. small firms can always outperform big firms on a level playing field. C. small firms often can offer more personalized customer services than big firms. D. small firms are slower to respond to opportunities than are large firms.

C

251. A __________ is a written document that details the business idea, the target market and the business's competitive advantage, financial resources available for the business, and the qualification of the management. A. feasibility product B. marketing plan C. business plan D. statement of intent

C

234. Dr. Smiley White just graduated from dental school. She is hoping to acquire the necessary funding to start her own dental practice. One advantage of this type of business is: A. above average opportunity to borrow funds at a high interest rate. B. nearly unlimited growth potential. C. the service is individualized and not easily mass-produced. D. very low start-up costs.

C Health care businesses that require advanced technical degrees to get licensed generally have a good chance of success due to the individualized attention necessary to perform the service.

198. Which of the following best describes the difference between an intrapreneur and an entrepreneur? A. Intrapreneurs start nonprofit organizations while entrepreneurs start profit-seeking businesses. B. Intraprenuers are practical while entrepreneurs are creative. C. Intrapreneurs work within existing corporations while entrepreneurs assume the risks of starting their own business. D. Intrapreneurs limit their efforts to financial investments, while entrepreneurs are involved in the management of all areas of a business.

C Intrapreneurs are creative people who work within a corporation to develop new products and generate new profits for the firm. Entrepreneurs start their own businesses, without any financial tie to a larger company.

281. Which of the following is not a recommended source of small business advice for persons contemplating a new business? A. Successful small business owners B. University internship programs C. Other prospective small business owners D. SCORE [Service Corps of Retired Executives]

C SCORE volunteers, successful small business owners, and university and college internship programs will often work with entrepreneurs and prospective small business owners. Generally, other persons contemplating the same thing are not the best source of information because they are learning and gathering information too.

182. A successful web-based strategy that helps a business spread the word about its website and products is called ____________. A. wildfire marketing. B. "it's all about the buzz." C. social marketing. D. affiliate marketing.

D

239. One way to get into business is to buy an existing company. The value of the business used to determine a fair purchase price is based on: A. the prospects for business competition. B. the current owner's retirement plan. C. the amount of government contracts the company has. D. the value of what the business owns, what it earns, and what makes it unique.

D

259. A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a: A. corporate raider. B. takeover specialist. C. financial capitalist. D. venture capitalist.

D

266. To be considered part of a market, an individual must: A. be a registered buyer. B. have made a purchase within the past 30 days. C. know the names and addresses of two or more sellers. D. have both a willingness to buy and the financial resources needed to buy.

D

Entrepreneurship is: A. managing businesses for others. B. a controlling interest in the ownership of a corporation. C. managing businesses that operate in multiple countries. D. accepting the risk of starting and running a business.

D

305. Given Peppy's willingness to accept the risks of opening and running Peppy's Pizzazzeria, he is clearly an example of a(n): A. arbitrageur. B. intrapreneur. C. gambler. D. entrepreneur.

D An entrepreneur is someone who accepts the risks of starting and managing a business.

293. After retiring as a telecommunications executive, Chad joined SCORE. As a SCORE counselor Chad will: A. provide venture capital funds for aspiring small businesspeople. B. visit high schools to advise students who are thinking about starting their own business. C. help in the research and development of new products for entrepreneurs to market. D. provide consulting services to small businesses for free.

D An important source of information for small businesses is the Service Corps of Retired Executives (SCORE). This SBA office has volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses).

287. Christine recently applied for a microloan from the SBA. Although several criteria are important, the Small Business Administration's decision to grant or deny the loan will largely depend upon: A. her credit history and the collateral she can offer. B. her age, since microloans are only available to senior citizens. C. her previous record of business success. D. the soundness of her business plan, and her integrity.

D Microloans are awarded on the basis of the borrower's integrity and the soundness of their business ideas.

223. Small businesses are important to the U.S. economy because: A. they fill in the gaps when large businesses want to let workers go on vacation or when large businesses want to temporarily cease production. B. banks and other financial services companies would not have borrowing customers, because small businesses borrow more than large businesses. C. they pay most of the tax revenue collected by the U.S. government. D. they create about 65% of new jobs each year and generate over 50% of the U.S. GDP.

D According to the textbook, small businesses contribute to a significant amount of yearly job creation and account for more than 50% of the U.S. gross domestic product.

200. Enterprise zones are: A. government-owned properties that are available for entrepreneurial ventures at a reduced cost. B. similar to incubator facilities but strictly run by city and state governments. C. blighted areas that contain toxic materials making them unsuitable for business operations. D. specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas.

D Enterprise zones are geographic areas where the government would like to encourage business development. City and state governments will provide business owners tax concessions for developing businesses in these area.

209. Southwest College received a government grant to establish a business incubator. This facility will offer: A. local government agencies assistance in obtaining funds for urban renewal. B. area businesses advice on employee benefits and ways to reduce taxes. C. venture capitalists an opportunity to identify new entrepreneurs. D. new businesses low-cost office space with basic business services.

D Incubators are created to reduce the start-up capital needed by new firms. Incubators offer assistance in the critical stage of early development with services such as accounting, legal advice, and secretarial help.

190. Successful entrepreneurs are self-nurturing. This means they: A. look to others for strength and encouragement. B. self-finance their business with no assistance from others. C. perform all business operations by themselves. D. believe in themselves and their ideas.

D Self-nurturing individuals have the ability to believe in an idea when no one else does, and to replenish their enthusiasm.