Chapter 5 questions

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

Retail and communications.

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

business plan

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.

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

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

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.

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

venture capital.

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

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

Jennifer would like to open her own business. According to the SBA, in 2012 women were 51 percent of the U.S. population, and owned at least ___ percent of all small businesses.

30 percent

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

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

500

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.

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?

Desire for guaranteed financial return.

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.

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.

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.

Mary's Models is a successful model airplane store. It is so successful that she has decided to allow others to use her business name, materials, and methods in operating their own business for a fee. 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.

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.

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.

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.

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 could he use to protect his interests?

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

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?

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.

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

Less than a week.

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.

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

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.

Portica knows the customers of her hat shop by name and knows each of their preferences. This demonstrates which advantage of a small business?

Personal relationships with customers.

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

SBA

SCORE is the acronym for

Service Corps of Retired Executives.

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

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

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 institute.

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.

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

The franchisor still maintains a great deal of control.

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.

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

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.

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

capital and management skills.

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.

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 2013, the SBA data showed that women-owned businesses are

financially sound and credit-worthy.

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

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.

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

franchisor.

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

greater potential for making a profit.

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.

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

service stations

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

The business that represents 99.7 percent of all employers in the United States is a

small business

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

small business.

In the United States, ___ account(s) for 97.5 percent of all identified exporters and produce(s) 31 percent of export value.

small businesses

All of the following are true about small business except

small businesses create cyclical unemployment.

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.

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

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 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.