ENT 2113 Final Exam

In the context of risks to new businesses, identify a true statement about risk tolerance.

What constitutes a risk is determined by an entrepreneur by observing his or her own tolerances.

Which of the following questions should a new business owner examine when considering leases?

What exactly is the new business owner leasing? Who is responsible for maintenance and improvements? Is there an ability to renew the lease?

Identify a true statement about the process of generating new business ideas.

As a business idea evolves, an entrepreneur must be willing to develop a new set of skills to make it successful.

________ are high-net-worth individuals who invest in businesses not as a business, but as individuals.

Business angels

The U.S. Small Business Administration

aid(s), counsel(s), assist(s), and protect(s) the interests of small business concerns.

The development and implementation of a new business is part ________ and part ________.

art; science

When a small business owner is advertising for a job, the company needs to attract ________ pool of applicants to choose from.

The largest

Identify a true statement about a large firm that has organizational slack.

The loss of an employee barely affects the abilities of its workforce.

Which of the following represents the impact of a poor employee on the functioning of a small business?

The owner's time is lost. The organization does not fully benefit from the employee. The problems may bleed over to other employees.

Sonor Designs is a small business that makes greeting cards. Because of the small scale of the firm's operations, it cannot afford to purchase the expensive printers it needs to make greeting cards. Instead, it rents the printers from another organization. In the context of business financing, Sonor Designs renting essential business equipment from another company is an example of

asset leasing.

In the context of supports for new businesses, why are established businesses often hesitant to buy from a start-up business?

because it is not clear if the new business will be able to fulfill an order or service a product in the future.

What are the advantages of leasing equipment for a new business?

beginning operations with a minimum cash outlay ability of the business to trade up as newer, higher-quality machines become available no hassles of an aging asset

Successful new business ideas can come from

books and magazines. an individual's background. hobbies.

In the context of entrepreneurial orientation, the presence of ________ often leads young people to be pioneers in an area, as they are not limited by the restrictions of the past.

bounded rationality

In the context of business risks, how can an entrepreneur identify competitors to a new potential business?

by observing what potential customers do to satisfy their current needs or wants

The capitalization of __________ method of valuation is performed by taking the net profit of the organization; subtracting or adding any unusual items; and dividing that figure by a capitalization rate

Earnings

In the context of financial tools, a business can quickly generate cash in the short run by selling accounts receivable at a discount to another company. This is a technique known as ________.

Equity

In the context of legal forms of business, identify an accurate statement about a general partnership.

Established partners can bring in new equity partners by surrendering a portion of their ownership position.

If a business is strong now but the entrepreneur senses that the future does not hold the same potential, then it might be a good time to __________ or harvest the business.

Exit

In the context of financial tools, a business can quickly generate cash in the short run by selling accounts receivable at a discount to another company. This is a technique known as ________.

Factoring

A venture capital start-up is oriented toward the personal goals of the founders.

False

An entrepreneur needs to set limits to how much time he or she spends on a business for it to be successful.

False

Boards of advisors are composed of key employees who advise a firm.

False

Entrepreneurial businesses fail to provide a means to meet the varied demands that individuals face in a society.

False

Entrepreneurs driven by circumstantial motivators are often more proactive than those with personal motivation for starting a business. Group starts

False

Even if a business were performing poorly, there would always be sizable goodwill value.

False

If a job is more central to an organization and has higher required skill levels than other positions, then the importance of employee references decreases.

False

Patents are inexpensive and easy to obtain and maintain.

False

The business plan for small businesses should be at least 50 pages long.

False

The second column in a gap analysis is devoted to listing the market need.

False

Venture capitalists typically do not invest more than $2 million.

False

Whether hiring for a line worker or a first line manager, an owner should devote the same amount of time in checking references. Group starts

False

A type of gap analysis that compares the possibilities in the marketplace with an individual's competence to address those gaps is called

Opportunity Analysis

Benefits paid for by a company, such as a vacation or vehicle, are called _____; they are often used by the company to minimize the tax owed to the government.

Perquisites

Which of the following is a method of valuation that requires the founder to find the price/earnings (P/E) ratio of a similar company and then multiply the P/E ratio by the net cash flow for year 5 and discount the P/E ratio back as a potential sales price in year 6 of the venture?

Price/earnings valuation

Threats to ________ are threats to the success of a new business related to its ability to establish and maintain a high-margin product or service.

Profit Margins

Identify a true statement about credit cards from the following.

They do not have a set upper limit. They have low interest rates. -None of the answers is correct. They are usually tied to a particular asset.

Which of the following is true of robber barons in the context of the history of entrepreneurial businesses in the United States?

They indulged in great abuses in order to succeed in their business.

The screening of résumés or applications prior to beginning an interview process for a job and the checking of references is important. Group starts

True

The success of entrepreneurial firms pursuing new opportunities requires a number of deliberate actions by the business founder concerning human resources issues.

True

When a potential business owner has several ideas for a business, he or she needs to identify one on which to perform a due diligence analysis.

True

he Myers-Briggs test is used for personality evaluations. Group starts

True

The cash flow method of ____________ requires that the net cash flow of the business be projected for some period of time into the future.

Valuation

What is the difference between venture capital funds and business angels?

Venture capital companies usually invest in large businesses, whereas business angels usually invest in small businesses.

What percentage of states has an unemployment compensation law?

100

The government regulates the employment of children under the age of ________.

16

Identify a true statement about the process of generating business ideas.

After analysis, entrepreneurs may change their ideas even if they initially thought that their ideas would be successful.

In the context of legal forms of business, identify a benefit of a Subchapter S Corporation over a Subchapter C Corporation.

An Subchapter S Corporation has limitations in the number and type of shareholders unlike a Subchapter C Corporation.

Identify an accurate statement about the hybrid compensation system.

An entrepreneur should provide bonuses in a timely manner that is relevant to the individuals in the firm and within the realities and constraints of the business.

The founders of a small business need to be involved in which of the following tasks when starting the new business?

design funding operating

Which one of the following is a huge advantage for small business owners to start a business?

desire to be one's own boss

James and Mary own a business. When they pay themselves an advance in salary or a bonus, it is called a(n) ________.

draw

Covore Inc., a start-up firm, receives the majority of the funds it requires to begin its operations from five individuals. In exchange for these funds, each individual receives a share of ownership in the firm. The funds provided to Covore Inc. by the individuals are an example of ________.

equity investment

In the context of good accounting practices, ________ allow entrepreneurs to perform a monthly tracking of how much they spend and ultimately form an annual record of all business-related costs.

expense accounts

All of these are harvest plan strategies except

franchising.

In the context of legal forms of business, a general partner in a limited liability partnership

has unlimited liability for any debts or judgments against the firm.

Characteristics of an entrepreneurial firm start-up include all except

having over 100 employees.

The process of generating ideas should occur in a(n) ________ manner and not in a(n) ________ fashion.

interactive; linear

Carla and John enter into a partnership and form a business. Under the partnership agreement, Carla is directly responsible for the management of the firm and its liabilities. John has a minor financial stake in the firm and works there, but he is not held responsible for the taxes and debts owed by the firm. In the context of the legal forms of business, Carla and John have formed a ________,

limited liability partnership

Before establishing a new business, the first thing founders should do is

list their personal skill sets.

In the context of business designs, one of the advantages of a corporation is that when it suffers losses, the founders will

lose only their investment in the business rather than their life's savings.

Debt is a form of ________ funding.

non-equity

When should a new business owner ensure there are sufficient financial resources to operate the business?

prior to the start

The owner of a firm considering a sale should have a CPA firm audit the current year's and last year's financial statements of the business and _____.

put all the statements into a standardized format

Human resources, as defined in economics, is the ________ and ________ of human effort directed toward producing goods and services.

quantity; quality

All of these are potential issues for an owner in a family business except

reprimanding a family member. promoting a family member. firing a family member.

Small companies have flourished in the United States because they

respond more quickly to their customers' needs.

What does a potential entrepreneur need to consider when starting a new business?

risk tolerance prior experience personality orientation

Which of the following types of firms do business incubators work best with?

scientific firms

Which of the following information should be obtained in the application/interview process?

social security number work history education and training

Borealis Computing is a small start-up firm that needs to purchase essential equipment and supplies to begin operations. Gencent LLC, a larger firm, offers to finance Borealis Computing's purchases. Under their agreement, Borealis Computing will repay Gencent LLC overtime at a specified interest rate. In the context of nonequity funding, Gencent LLC's financing of Borealis Computing's purchases is an example of ________.

supplier credit

Which of the following is an advantage that small firms have over large businesses?

the ability to respond quickly to changes

The break-even point is defined as

the level where revenue coming into the firm is sufficient to cover expenses.

The World Bank estimates that one of the strongest factors in the growth of any nation's GNP (gross national product) is ________.

the presence of small and medium-sized enterprises

A firm's discount rate for cash flow represents _____.

the return expected by an investor and the accounts for the riskiness of the venture

The Americans with Disabilities Act (ADA) applies fully to any firm with more than 15 employees.

True

The Fair Labor Standards Act (FLSA) establishes a minimum wage for all workers, except workers on small farms and administrative employees.

True

The first column in a gap analysis is devoted to various business ideas.

True

A rule of thumb for new businesses that are run by owner-managers is to use _____ as a factor for discounting the cash flow.

30%

A program that allows employees to contribute to their retirement on a tax-free basis is ________.

401k

Which of the following statements is true of a family business?

A family business is generally run by and for the benefit of a particular family.

In general, the greater the debt a business owner is willing to take on, the ________ the risk tolerance.

Higher

________ is the quantity and quality of human effort directed toward producing goods and services.

Human resource management

In the context of legal forms of business, identify a true statement about limited liability partnership (LLP).

In a limited liability partnership, limited partners can work at the firm but not be active in its management.Correct

Some communities offer facilities that house new businesses and provide resources for them. These are called ________.

Incubators

In the context of legal forms of business, identify a true statement about sole proprietorship firms.

Laws governing business practices do not recognize other equity investors, which limits the growth potential of such firms.

Taking the earnings before interest, taxes, depreciation, and amortization, reworking the figure based on analysis of the cash flow statement, and multiplying the remaining figure by a market multiple is a popular method for which valuation technique?

Market estimation valuation

Which of the valuation methods involves taking the projected earnings of the business and multiplying that figure by the market premium of companies in their industry?

Market estimation valuation

Which of the following personality tests is based on the philosophy of Carl Jung?

Myers-Briggs

Shrinkage of a firm's inventory can result from either employee or customer theft.

True

Identify the most common way to sell a business.

Sell the business intact to a third party with the aid of a broker.

Trilane Systems is a small business. Its owner, Myra, is also its only employee. She handles the business's operations herself and is responsible for all of the business's income and losses. In the context of the legal forms of business, Trilane Systems is a

Sole proprietorship.

Identify a true statement about the history of entrepreneurial businesses in the United States.

The 1880s saw the initial development of the nation's large industrial base.

Which of the following experiences can entrepreneurs evaluate when generating business ideas based on their education?

The courses they took that were particularly enjoyable

Which of the following statements is true of a performance review in an entrepreneurial business?

The formal conversation with a worker who is doing a good job and appreciating his or her work is a form of compensation.

Identify a defining characteristic of entrepreneurial firms.

They tend to be oriented toward the personal goals of the founder.

A cash-based accounting system recognizes expenses as they are paid and recognizes revenue when it is generated.

True

A patent is a claim of intellectual property that covers a specific innovation.

True

A person who is passionate about a hobby might be able to turn that hobby into a successful business.

True

A rule of thumb in the founding of businesses has always been that an owner whose business is both a vocation and an avocation is difficult to beat.

True

Accepting an equity stake from an investor makes the owner accountable to that investor when founding and managing a business.

True

According to the agency theory, a manager at a large firm is more likely to exploit organizational resources for his or her own benefit than the owner of a small firm.

True

Banks will lend money for the establishment and maintenance of inventory by arranging a revolving line of credit.

True

Entrepreneurial Businesses have the ability to make greater profits in markets that have been ignored by larger corporations.

True

In a Subchapter C Corporation, it is possible to have a double taxation situation.

True

In the context of the triggers that encourage new business formations, circumstance motivators tend to result in more of a defensive positioning. Group starts

True

John takes out a loan for a necessary machine in his business. This type of loan would be called asset-based lending.

True

A small business owner must possess all of the following except

a sequential formula.

Several successful businesspeople establish a partnership with each other. They combine their financial resources and use the resultant pool of resources to make equity investments in various high-growth new undertakings. In the context of equity funding, the partnership and the pooled resources of the businesspeople are best described as

a venture capital fund.

Years ago, economists mistakenly predicted that small businesses would

be replaced by a smaller number of big businesses.

Job advertisements written for a new hire should

be kept concise and should communicate the culture of the firm.

In a lease, a landowner can enter a business premises for all the following reasons EXCEPT

whenever the landowner wants to.