MGMT 375 Exam 2 SELU Settoon

______ is a measure of the amount of debt relative to total investment.

- Financial leverage

When the financial management needs of a business are to reinvest for maintenance or to build owner wealth, the business needs

- Financing for operations

The ______ is the percentage amount that the payout of an investment offers to its investor.

- Gain on investment

Fill in the missing variable in the following calculation for the gain on investment (payout - _____ + dividends)/_____.

- Investment - Investment

True or false: In the U.S., government programs are the number one source for financing small businesses.

- False

True or false: Dividends are a charge for the use of money and is usually calculated as a percentage of the principal.

- False. Dividends are payments of profits to the owners of corporations.

To meet the high production demand, Jack Wilson—the owner of JG Sawmills—needs to invest in a frame saw. He has narrowed down to two choices: a double cut frame CZ84 saw with chipper and a HY-200 saw with double arbor bearings. The cost of CZ84 will be $91,000, whereas the cost of HY-200 will be $110,000. The salvage value of each type is $0 (zero) and both will have a useful life of 4 years. Assuming that the money is received evenly across the year, what will be the payback period if Jack decides to invest in the CZ84 double cut frame saw?

- 2 years and 11 months

A(n) ________ plan is a document designed to detail the major characteristics of a firm—its product or service, its industry, its market, its manner of operating and its financial outcomes with an emphasis on the firm's present and future.

- Business

Process is the _____.

- Business activities necessary to convert inputs into desired outputs

The cost of _____ is the percentage cost of obtaining future funds.

- Capital

______ are assets that are expected to provide economic benefits for periods of time greater than one year.

- Capital assets

Something of value given or pledged as security for payment of a loan is called ______.

- Collateral

True or false: Informational plans focus on the market and operationalization of a new invention.

- False (Invention plan)

True or false: The number one killer of young firms is overstated numbers which include sales or profits that are too optimistic, or owner salaries above the minimum needed to live when the firm is just starting out.

- False (Not enough money/Inadequate cushion)

True or false: Gift capital earned its name due to the lender giving the business a loan without any collateral, charging no interest, and not specifying a payment schedule.

- False. When someone provides gift capital to a business, the owner is not obligated to either give the person ownership or repay the gift back.

Amounts and schedules for returns, stability of firm, funds use, and investment are most likely to be the major business plan concerns for

- Family and friend investors

Joe is planning a new mobile restaurant business. He wants to convert an antique bus into a sit-down restaurant with a service window allowing him to serve people within the bus and walk-ups who want to get their food and take it home. Joe is performing some research into his project and is looking at the overall business idea, the product/service, the industry and market, financial projections (profitability), and the plan for the future action. Joe is performing a(n)

- Feasibility Study

Industry ________ are rules of thumb that are commonly used to estimate firm value in relation to some easily observable characteristic of the business.

- Heuristics

When a company is using a process for organizing creative thinking using four steps, one of the steps in

- Incubation

Which of the following is considered an acquisition cost for a new piece of equipment?

- Purchase price - Transportation - Installation - Testing - Calibrating

Which of the following statements is not true of financing with leases?

- The 2 types of leases differ primarily in how property is acquired in the beginning

A community development organization is

- An SBA organization that is authorized to make insured loans to small businesses that are expected to increase economic activity in an area.

Which of the following situations indicates that it makes better sense to first undertake a part-time business?

- Damon wants to gain experience in the advertising industry.

______ is a legal obligation to pay money in the future.

- Debt

When interpreting this ratio, a lower ratio indicates greater solvency and a higher ratio indicated increased business risk.

- Debt to equity ratio

The assignment of work to others over whom one has power is referred to as

- Delegation

______ is/are payments of profits to the owners of corporations.

- Dividends

________ is a special set of observational and thinking skills that help entrepreneurs identify good opportunities.

- Entrepreneurial alertness

A _____ is a gift of money made to a business for a specific purpose.

- Grant

Which of the following activities mimics multilevel marketing?

- Illegal pyramid schemes

Eighty-seven percent of start-ups that begin ________ are still in operation five years later.

- In business incubators

Which of the following statement is not true about considering how to organize your new part-time business?

- In most cases, the cost to start-up and the time to market are unrelated

A charge for the use of money, usually figured as a percentage of the principal is called

- Interest

Which of the following statements regarding quality are correct?

- It is a product's or service's fitness for use. - It is a way to improve productivity. - It is measured by characteristics like durability, reliability, and dependability.

The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer is known as _______.

- Just-in-time inventory

A corporation is a

- Legal "artificial" entity that is formed by filling specific documents with a state government.

For part-time businesses, ________ refers to the documented permission from the government to run a business and may be required for certain professions such as beauticians or home-based day-care providers.

- Licensing

Which of the following is a disadvantage of a start-up?

- No revolving credit from suppliers or banks

When using a process for organizing creative thinking in four steps, the ________ step of a creative thought involves exploring the problem or opportunity in all directions.

- Preparation

Fair market value is the _____.

- Price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction

______ is the ratio measure of how well a firm does in using its inputs to create outputs.

- Productivity

The amount by which sales prices exceed product costs refers to

- Profit margins

Identify an important consideration when giving a gift to help someone start or continue their business.

- Put your agreement into writing - If it is a gift, have the agreement specifically say so - If it is a loan, have the agreement specify the exact interest and payment terms - If it is an equity investment, consider nonvoting stock

The cost incurred to substitute one asset with an identical asset is called ______ value.

- Replacement

A ________ price is a minimum acceptable selling price in an auction format, such as eBay.

- Reserve

This ratio is determined by dividing net income by average investment.

- Return on investments

A ______ is a private business that is authorized to make SBA-insured loans to start-ups and small businesses.

- Small business investment company (SBIC)

A business that is created by separating parts of an operating business into a separate entity is called a

- Spin-off

A partnership business form is

- When two or more people cooperating to conduct a business enterprise.

Which of the following is a benefit of leasing?

- An asset can be leased at a very low down payment.

Wealthy individuals who invest in companies in relatively early stages of their development are called ______.

- Angel investors

In the context of sources of financing, _____ is money that is contributed to a business in return for part ownership of the business.

- Equity capital

True or false: "The ask" part of the pitch is reserved only for when you are asking for funding.

- False

Recovering the value of investment through a sale of a firm or its assets is known as a _____.

- Harvest

The most typical form of aggrandizement in part-time businesses is

- Implying that a firm is a full-time one when it is only part time

Which of the following is an example of debt financing?

- Incubators

Efficiency means doing the same with _____.

- Less

Service or product quality is most likely to be crucial in a business plan for

- Potential customers

In the SCAMPER tool, "R" stands for

- Reverse

Which of the following is a reason why most new businesses start on a part-time basis?

- The cost of entry and exit is low

A ________ is a permission from a government organization to act differently than what the laws state.

- Variance

Government specifications for acceptable use of land and buildings in particular areas are called

- Zoning laws

Which of the following is not a common form of part-time businesses in the United States?

- A franchise

Which of the following businesses should be most concerned with property, plant, and equipment?

- A rancher

A ________ describes the difference between the original acquisition cost of capital assets and the amount of depreciation expense that has been recognized to date.

- Book value

Which of the following is the first step for performing due diligence?

- Conduct extensive interviews with the sellers of the business

Which of the following is a drawback to financing with gift capital?

- No foundations exist to specifically provide start-up or working capital funding.

In the context of financial ratios for comparing investment alternatives, the quantity of time it takes a business to regain the funds it paid out to acquire a capital asset is referred to as _____.

- Payback period

An equity investor's primary concern is

- The firm's growth potential.

Activity ratios:

- They calculate how productive a particular asset is in producing sales activity.

Which of the following terms best represents something a business owns that has economic value or is expected to have economic value in the future?

- Asset

Which of the following statements are true of economic order quantity (EOQ)?

- It is the quantity of inventory at which the final cost of inventory is minimized. - It helps business owners know the amount of inventory to order.

Which of the following statements are the rules for benefiting from outsourcing?

- Know yourself and outsource what the business cannot do well - Keep strategy decisions in-house, since others will not be as knowledgeable about oneself or customers - Fully specify tasks that are to be outsourced - Know with whom you are contracting, since choosing a competent contract is key to success

In the SCAMPER tool, "M" stands for

- Modify

Jacob has started a graphic design company called Interon Graphics. As Interon Graphics moves into the growth phase, which of the following would be Jacob's dominant financial management need?

- Obtaining increasing amounts of cash inflows

In the context of financial ratios for comparing investment alternatives, which of the following is the formula to calculate the rate of return on investment (ROI)?

- ROI = (Average annual profits)/(Average investment)

The product/service description component of the classic feasibility study typically is developed from the ________ element in your IDEO screen.

- Technical feasibility

Not so long ago, home businesses were strongly discouraged, if not outright banned in most towns and cities. Which of the answer options is the main reason this has changed over the years?

- The Internet

Which of the following statements about grants are correct?

- The U.S. government, most state governments, and semiprivate and private economic development agencies offer grants. - The purpose of grants is to increase economic activity, provide job growth, and increase the overall standard of living for citizens. - The SBA offers a loan and grant search tool for small business owners.

Microinventory is _____.

- Used by Internet firms where inventory is only purchased after a sale is made

The amount for which an asset would sell, less the costs of selling the asset is called

- Net realizable value

______ is a product's or service's fitness for use, measured as durability, reliability, serviceability, style, ease of use, and dependability.

- Quality

Loans that provide the lender with the legal right to seize specific assets in the event of nonpayment is called ______ debt.

- Secured

If the owner plans to ________ a business, he or she should be removing all surplus cash and tightening the cash-to-cash cycle to the shortest time possible.

- Sell

Sarah opening her own home-based business preparing tax returns. She gathers all a client's data and prepares and files their tax returns. This is an example of _____.

- A process

Smith & Roden Enterprises (SRE), a law firm, paid a leading search engine to put their company's website at the top of the search engine's search list. This form of advertising used by SRE for promotion of their firm is known as

- A sponsored link

A form of business termination in which the firm's legal or financial obligations are not fully met at closing describes which of the following?

- A workout

Which of the following is not an alternative for transferring or terminating a firm?

- A workout

Which of the following is most likely to be a major business plan concern for bankers?

- Asset or collateral base

Which of the following are one of the Four Cs of borrowing?

- Character of the business' owners. - Conditions of the industry and economy in which the business operates. - Collateral that can be used to secure the loan. - Capacity of the business to repay the loan.

________ refers to a fee the service levels on a person or a firm for any variety of problems related to the sale.

- Charge-back

The idea trigger of the separate products, services, or whole businesses that entrepreneurs can put together to create another distinct business represents which cue of the SCAMPER tool?

- Combine

Which of the following is commonly used to estimate the value of a business?

- Comparable sales of other firms

Corrective feedback _____.

- Compromises a value judgement about behaviors and processes of the business

Which of the following statements regarding operating leases are correct?

- These are similar to renting. - At the end of the lease period the lessee either returns the asset or purchases it at the asset's fair market value. - Ownership of the asset never passes to the lessee.

True or false: Obtaining outside equity financing can only be done if your business is organized as: a partnership, a corporation, or a limited liability company.

- True

True or false: The financial statements in a business plan include income statements, cash flow, balance sheet, and their respective assumptions.

- True

Which of the following statements regarding bootstrapping are correct?

- Studies report that between 90 and 95% of start-up business are initially funded through bootstrapping. - Business owners often use their own capital and the funds generated by operating the business to finance the business' start-up and growth. - The majority of small business start-ups are funding by bootstrapping.

Which of the following statements is true of determining the value of your operating assets?

- The disadvantage of disposal value is that a new asset is often much greater than the price of an identical asset already in your business.

Leverage ratios:

- They determine the relative risk that a business problem could cause bankruptcy.

Which of the following statements regarding angel investors are correct?

- They like businesses that are located near them. - They invest their own money. - They typically invest between $50 and $250K. - They invest in businesses due to their personal interest and as a personal investment.

Identify a suggestion for businesses to succeed in crowdfunding.

- Document your business as it will have to be a corporation or an LLC - Make a business plan to show how the business will work to earn profits - Create a compelling, enthralling story to convince potential funders of the value of the plan - Create a snappy, professional-looking video about the business - Develop a list of potential investors

Which of the following aspects of the SCAMPER tools involves searching for opportunities that arise when a person gets rid of something or stops doing something?

- Eliminate

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Most successful elevator pitches lead with a

- Hook

Which of the following statements regarding feedback are correct?

- All inputs, materials, and labor must be compared to a predetermined standard. - All control systems must have feedback. - If there is a variation between the output and the standard action, management action must be undertaken to correct the situation.

This option is a facility that offers subsidized space and business advice to companies in their earliest stages of operation.

- An incubator

Which of the following statements about accelerators are correct?

- An organization that supports start-ups, typically of a particular type (e.g., Internet, biotech, fashion, sports, women-owned firms, etc.) with a financial investment, free or inexpensive office space, mentoring, a variety of free or low-cost support services, and other resources. - The goal of an accelerator is to accelerate a start-up from its early stages to being ready to pitch for investment. - Most accelerators take an equity stake in the companies they help.

True or false: Economic order quantity (EOQ) is also called reorder point.

- False

Which of the following statements is true of the process of pledging receivables?

- In this process, a business is liable solely for the amount borrowed and accrued interest on the loan. - It is usually less expensive than factoring. - It involves using receivables of a business as collateral for loan.

______ equity is money from selling part of the business to people who are not and will not be involved in the management of business.

- Outside

A person or organization offering the rights to use a particular piece of intellectual property is referred to as the

- Licensor

During a feasibility study, the examination of customers you wish to serve and those who would show interest in your product is helpful. This step defines your

- Target market

A supply chain is _____.

- The line of distribution of a product from its start as materials outside the firm to its handling by sellers into the hands of customers

True or false: Founders of small businesses often find it very difficult to give up decision-making authority to family members.

- True

A(n) ______ is an organization that supports start-ups with a financial investment, free or inexpensive space, mentoring, and other services.

- Accelerator

The total cost of obtaining an asset, including purchase price, transportation, and installation in order to ready it for its first productive use is called the ______ cost.

- Acquisition

Reinforcing feedback _____.

- Awards effective methods and desired employee behaviors in the business

Identify an advantage of borrowing money for capital investment.

- Borrowing enhances the potential for higher rates of return for the owners. - Borrowing allows the owners to keep a greater level of control of the business.

The ratio of the value of a firm to its annual earnings is called the

- Earnings multiple ratio

True or false: Financial statements such as income statements, cash flow, and the balance sheet are found in the financial summary section of the business plan.

- False

________ refers to the value of a business that exceeds the sum of the value of all individual assets but that cannot be sold separately from the business.

- Goodwill

There are two general sources of gift financing

- Institutional and personal.

Which of the following statements concerning inventory is true?

- Shop-lifters are responsible for the majority of inventory thefts from retail and wholesale outlets.

Risk is

- The level of probability that an investment will not produce expected gains.

Which of the following is a disadvantage of buying a franchise?

- You give up creative control and have greater reliance on your parent company's financial status

A(n) _____ practice is the most productive way found in an industry.

- Best

True or false: For small businesses, professional management is an issue of education, titles, and credentials.

- False

Which of the following statements regarding borrowing are correct?

- No matter the form of business, the lender makes the loan to the owner, not the business. - The owner's character is an important lending criteria and it is judges by his or her personal credit rating. - The owner is not separated from the business, in fact the business is considered an extension of the owner.

Rejecting existing ideas, and presenting a way to do things differently refers to the ________ strategy.

- Radical innovation

Identify a cost incurred with all capital assets over time.

- The cost of acquiring the asset - The cost of owning the asset - The cost of operating the asset - The cost of disposing of the asset

Which of the following are the broad categories of financial ratios?

- Activity ratios - Profitability ratios - Liquidity ratios - Leverage ratios

True or false: A company's goodwill is its best collateral.

- False

Financial risk is

- The uncertainty of returns and the probability of losing money.

When developing the customer segments of your business canvas model, which of the following statements is true?

- Each type of customer is a customer segment

Which of the following is a statistical technique that determines the amount of inventory that a business must possess to reduce total inventory cost?

- Economic order quantity

______ is the comparison of productivity ratios to see the extent that an organization has generated more outputs with fewer inputs.

- Efficiency

Which of the following statements regarding operations are correct?

- It converts inputs into outputs. - All businesses have some type of operations. - Operations may include designing, fabricating, and assembling.

Sam intends to present a business plan to his potential key employees. The employees would most likely expect to know about the ________ during the presentation.

- Long-term prospects

Contracting with people or companies outside one's business to get work done for the business is known as

- Outsourcing

______ is contracting with people or companies outside your business to do work for a particular business.

- Outsourcing

The price at which a buyer is unconcerned about buying or not buying the business is called

- The point of indifference

Informational feedback _____.

- Involves data about the processes of the business

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. If Connie gets her family and friends involved as investors, which of the following is most likely to be their concern?

- Amounts and schedules for returns

Which of the following is true about RSS feeds?

- RSS feeds sends whatever web material is specified to subscribers to that feed

An auction in which the low bid gets the business or wins is known as a ________ auction.

- Reverse

Employees take on significant risks when they work for a start-up business so many offer

- Stock options

True or false: The practice of acquiring inventory only in response to a completed sale is called a pull-through system.

- True

________ is a process of producing an idea or opportunity that is novel and useful, frequently derived from making connections among distinct ideas or opportunities.

- Creativity

_____ is an arbitrary, but regular and systematic, method used to take asset value as an expense for the purpose of calculating net income or loss.

- Depreciation

Book value is the _____.

- Difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date

The net amount realized after subtracting the costs of getting rid of an asset from its selling price is called ______ value.

- Disposal

All of the following are major concerns of moonlighting except

- Volatility

Which of the following is true of the eBay website?

- You can buy cars or even 75-ton construction cranes on eBay

The single greatest hurdle to a successful start-up is obtaining and maintaining sufficient cash to support both operations and growth. Which of the following is needed by a successful start-up to overcome this hurdle?

- High margins

Which of the following statements regarding secured debt are correct?

- Asset loans are usually secured by large assets like automobiles, machinery, and other equipment. - It is the debt that is secured by specific assets that can be seized for nonpayment. - Commercial banks and credit unions make secured loans.

When looking at e-commerce's percentage of total sales, the largest percentage comes from this industry.

- B2C retail trade

Which of the following is most likely to be achieved as the result of starting a business with established customers?

- Immediate cash flows

In the context of financial ratios for comparing investment alternatives, which of the following are disadvantages of using the rate of return on investment (ROI) analysis?

- It involves profits that are not the same as cash - The method ignores the time value of money

In the context of financial ratios for comparing investment alternatives, identify a true statement about rate of return on investment (ROI).

- It is a measure of the connection between an initial investment and the profits that are expected to be obtained from making the investment.

______ debt are loans that do not allow a lender to seize specific assets in the event of nonpayment.

- Unsecured

There is much a small business can do to create memorable images and advertising for itself, and it does not need expensive television ads to do it. Which element of SCAMPER is being referred to here?

- Magnify

A(n) ______ is an SBA-approved partner that offers SBA-guaranteed loans of under $50,000 to eligible small businesses.

- Microlender

True or false: Selling your product or service in a limited area, for a limited time is known as parallel marketing.

- False

When examining the exchange aspect of the BRIE model, there are two key groups outside your business with whom even part-time businesses must deal—customers and

- Government

Which of the following best describes aggrandizing?

- Cathy, who does computer repairs, lies to customers about having an office in a businesspark when she actually works part-time from her home.

Which of the following is the primary goal for performing due diligence?

- Conduct extensive interviews with the sellers of the business

________ refers to a situation when what is best for one's part-time business is different from what is best for his or her full-time employer.

- Conflict of interest

Replacement value is the _____.

- Cost incurred to substitute one asset with an identical asset

The limitations imposed on a business's property by neighborhood groups are referred to as

- Covenants

The best way to determine the financial situation of a business is through

- Crafting a business plan

A question such as: What if people did not have to leave their houses to go grocery shopping? reflects which cue from the SCAMPER tool?

- Eliminate

Crowdfunding refers to

- Funding a business online through gifts made to the business.

Which of the following is an excellent way to find businesses for sale?

- Networking

The primary advantage of the payback period is that _____.

- It allows easy comparisons of alternatives

Which of the following is true of royalty financing?

- It involves an investor providing funds to a business for a contractual percentage of the revenues of the firm for a contractual period.

Which of the following statements regarding microlenders are correct?

- Loans require less paperwork than regular Small Business Administration backed loans. - They can only lend up to $50,000. - Loans are guaranteed by the Small Business Administration.

________ refers to a type of periodic inventory that conducts a count of the entire inventory being held for sale at a specific point in time.

- Physical inventory

Which of the following statements about pop-up businesses is not true?

- Pop-up businesses are for individual entrepreneurs only

What would happen when a small business that is growing becomes too great to be handled alone by an individual owner?

- Professional managers are hired to share the management load

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following is not part of the classic business plan outline?

- Signature block

________ is provided by state and local governments, primarily to encourage specific activities that are expected to improve the blighted areas or provide additional employment.

- Tax abatement

True or false: All entrepreneurs have at least four sets of resources: access to capital; their own skills and abilities; their own knowledge; and their network of friends and business associates.

- True

True or false: Intangibility, inseparability, and perishability are the three characteristics of services that impact operations choices and decision making.

- True

Which of the following statements about innovation and building an idea-prone culture is not true?

- Innovative companies automatically develop out of innovative business ideas

Using low-cost or free techniques to minimize the cost of doing business is called _____.

- Bootstrapping

______ capital is capital resources that neither provide any ownership nor require any repayment to the giver.

- Gift

In the context of financial ratios for comparing investment alternatives, which of the following are advantages of using the rate of return on investment (ROI) analysis?

- It is easy to calculate (simple to determine) - It relies on accounting information with which business owners, lenders, and investors are comfortable

Capital leases are _____.

- Leases in which at the end of the period the asset becomes the property of the lessee, possibly with an additional payment

True or false: A start-up usually can easily gain revolving credit from suppliers and financial institutions.

- False

________ refers to searching and capturing new ideas that lead to business opportunities.

- Opportunity recognition

The ratio of debt to equity that provides the maximum level of profits is called ______.

- Optimum capital structure

A(n) ______ is the activity identified by authoritative bodies as examples of optimal ways to get things done in a particular industry, profession, or trade.

- Best practice

A ______ is a direct reduction in the amount of taxes that must be paid, dependent on meeting some legal criteria.

- Tax credit

To meet the high production demand, Jack Wilson—the owner of JG Sawmills—needs to invest in a frame saw. He has narrowed down to two choices: a double cut frame CZ84 saw with chipper and a HY-200 saw with double arbor bearings. The cost of CZ84 will be $91,000, whereas the cost of HY-200 will be $110,000. The salvage value of each type is $0 (zero) and both will have a useful life of 4 years. Kevin has taken an apartment on lease for five years with a monthly rental of $3,500. At the end of five years, Kevin will be the legal owner of the apartment after an additional payment of $80,000. This type of lease is an example of a(n) ________ lease.

- Capital

Josh, an electronics retailer, noticed that the e-commerce business was booming. He started an online shopping website to take advantage of this surge in business. As a result, his business attracted more customers from all across the country. This reflects Josh's

- Entrepreneurial alertness

When an individual sells part of his or her business, the money he or she gets is _____.

- Equity capital

Which of the following ratios measures the percentage of sales revenue available to pay operating costs and to provide profits after paying for inventory?

- Gross margin ratio

Working on one's own part-time business after a regular job is referred to as

- Moonlighting

The amount that revenues exceed expenses is known as _____.

- Profitability

Which of the following is the idea trigger for the "substitute" cue of the SCAMPER tool?

- The opportunities that come as a result of replacing something that already exists

A method of obtaining capital in which investors give money to a business in return for a guaranteed percentage of revenues is referred to as _____.

- Royalty financing

True or false: In the context of a business plan, a firm's responsiveness to customers is a key concern of bankers.

- False

True or false: One disadvantage of purchasing an existing business is that it requires more cash outlay than creating a start-up.

- False

Which of the following statements about capital budgeting are correct?

- Its goal is to improve the quality of decisions about how to best use a business' scarce resources. - It works by determining the costs and benefits of each alternative investment. - It answers the question, "Which of the available investment alternatives provides the greatest benefit relative to the cost of the investment?"

Which of the following statements regarding profitability are correct?

- The business' capacity to earn profits is the most single factor for being able to borrow significant amounts of money. - Profitability is a primary measure of the business' capacity to repay loans. - Cash flows from operations that have been consistent indicate that the business can reliably convert profits to cash.

________ is a general term for real estate, but it can also be applied as a legal term for anything owned or possessed.

- Property

________ is the crucial skill needed for juggling your part-time business and the rest of your life.

- Time management

True or false: A mission statement is typically longer than a vision statement.

- True

Which of the following are disadvantages of renting an asset when compared with buying the asset?

- You do not have an ownership position - The asset cannot be used as collateral to obtain borrowed funds - The value of the asset does not show up on a firm's balance sheet

True or false: Few small businesses provide credit directly to customers.

- True. Most small businesses accept credit card instead of direct credit.

A legal agreement that allows a business to be operated using the name and business procedures of another firm is referred to as a

- Franchise

_____ is the process of transforming materials, labor, and energy into goods or services.

- Operations

Which of the following statements regarding capital assets are correct?

- The value that these assets bring to the business is often more than if they were sold. - Most small businesses have few capital assets. - Land, buildings, and machinery are examples of capital assets.

When determining the value of your operating assets, discounted cash flow valuation methods define utility as being _____.

- The net cash inflows that the asset will produce

Tony was considering buying a franchise that included the right to use the company's trade name, specifications of the product to be sold, operating methods, marketing plans, and national advertising. Which of the following types of franchising does this situation illustrate?

- A business format franchising

Researchers in the field of entrepreneurship and small business believe that ________ behavior is the most basic and important entrepreneurial behavior.

- Opportunity recognition

Profitability ratios:

- They calculate management efficacy in generating wealth from sales and from invested funds.

True or false: A process is what a business does when it takes some raw material and converts it into a valuable output. This does not apply to service businesses.

- False

In the context of financial ratios for comparing investment alternatives, a disadvantage to using the payback period analysis is that _____.

- It disregards the time value of money - It disregards all cash flows that occur after the payback period

Gabriel has a product idea of a device which he believes will help people manage their daily chores, hence making their lives easier. He is unsure if the device is actually a feasible product but shares the idea with his boss and coworkers anyway. Gabriel is positive his device will get a fair review. He has offered other ideas in the past and one was now a viable product for the company. Which of the four ideas for making a creative business culture best describes Gabriel's company?

- Positively reinforce ideas

If entrepreneurs realize that all the traditional applications for their products have disappeared and that they have surplus products, which of the following elements of the SCAMPER tool are they most likely to employ?

- Put to other uses

The goal of a feasibility study is

- To assess if a business idea can be profitably brought to market

After successfully operating for five years, Tina plans to sell her computer service center. Which of the following would be Tina's main financial management need as she exits the business through sale?

- Optimizing capital structure for profits

Which of the following statements regarding outsourcing are correct?

- Today, companies outsource to other local companies that have expertise in a specific area. - Technology has made outsourcing available. - Out sourcing does not necessarily require dealing with foreign firms.

The IDEO screen consists of asking yourself three questions to help you screen entrepreneurial ideas. Which of the following is not one of those three questions?

- Is the solution feasible enough to receive funding?

Sam used his management skills to start a loans advising website. He started seeing clients at his home before it grew into a well-established company in the next ten years. Which of the following entrepreneurial methods did he use in the beginning, to reduce the financial risk of his start-up?

- Lean method

True or false: A perpetual inventory is a system of recording the receipt and sale of each item as the receipt and sale occur.

- True

True or false: Key resource acquisitions, also called bulk asset purchases, are the only way a sole proprietorship may be purchased.

- True

Which of the following statements is true of documenting the operations of your business?

- Every business process does not have to be extensively documented.

______ lease is a long-term rental in which ownership of the asset never passes to the person paying the lease.

- Operating

_____ is giving a third party legal rights to debts owed to a business in order to provide assurance that borrowed money will be repaid.

- Pledging receivables

Which of the following statements regarding cost of capital is true?

- The lower the cost of capital of a business, the more profits the owner can keep for himself of herself.

If a business owner assumes that he or she needs to do all the work, make all the sales calls, and solve everybody's problems, which major pitfall is the business owner becoming a victim to while trying to become more innovative?

- Obeying rules that do not exist

Which of the following describes the equation for productivity?

- Outputs/Inputs

For new entrepreneurs, which of the following would be a good reason to undertake a part-time business first before a full-time one?

- When you need to gain basic business experience

True or false: A screening plan provides information on the company, product/service, market, and critical risks to prospective business.

- False

True or false: Assigning a high value to inventory results in increased sales margin and reported profit, but at the price of paying increased income taxes.

- False

Which of the following statements regarding safety stock are correct?

- It provides a cushion when sales are greater than forecast or when deliveries are delayed. - Most managers use a rule of thumb developed from experience to decide on safety stock levels. - Having too little stock is often worse than having too much.

_____ stock is an amount of inventory carried to ensure that the business will not run out of inventory due to fluctuating sales levels.

- Safety

Depreciation is based on which of the following assumptions?

- The value of an asset declines in a predictable manner over the period of utility.

Which of the following statements is true when referring to the IDEO screen?

- You should answer the IDEO screen questions with only a few words

Which of the following statements regarding outside equity are correct?

- People who buy ownership rights in a business are considered outside equity investors. - They are said to be outside, since they are not part of the business' management. - These individuals are called investors, since they are lettering a business owner use their money now in order to get wealth in the future. - It is called equity, because the investors have legal ownership rights to the business.

Which of the following is a disadvantage of offering credit to customers?

- Often businesses will have to borrow to replace the missing cash. - Providing credit delays the receipt of cash. - Sooner or later a customer will not pay his or her bill.

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following is most likely to be included in the title page of a classic business plan?

- Proprietary statement

Liquidity ratios:

- They determine a business's capacity to pay debts and expenses that are due in the current accounting period.

The strategy for using the online pilot test approach is

- To show potential partners that the idea can generate sales

Which of the following statements about debt are correct?

- It is a claim on the value of assets that a business owns. - Banks and other creditors can force a business into bankruptcy if it does not pay it debt. - The federal government provides loan guarantees for small businesses through the SBA to make borrowing easier - It can take many forms and be both secured by an asset and unsecured like when borrowing using a credit card. - Businesses may borrow from many sources like banks, development agencies, governments, and individuals.

To meet the high production demand, Jack Wilson—the owner of JG Sawmills—needs to invest in a frame saw. He has narrowed down to two choices: a double cut frame CZ84 saw with chipper and a HY-200 saw with double arbor bearings. The cost of CZ84 will be $91,000, whereas the cost of HY-200 will be $110,000. The salvage value of each type is $0 (zero) and both will have a useful life of 4 years. Which of the following is a disadvantage of renting capital assets?

- It requires the business to make regular, timely payments

Which of the following statements regarding just-in-time (JIT) inventory management are correct?

- It ships product to the customer immediately upon completion. - It assembles product in the absolute minimum time possible. - It accepts inventory as it is sold. - It is the ultimate extension of pull-through processing. - Raw materials, work in process, and finished goods are all kept at the minimum levels possible.

Identify correct statements about depreciation.

- It is based on the assumption that an asset has a fixed, determinable period of utility. - It is arbitrary. - It assumes that the value of the asset will decline in a continuous and predictable manner over the period of utility. - It is based on the assumption that an asset has a fixed, determinable value that will exist when the depreciation process is complete.

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. In Connie's business plan, which of the following components is most likely to be of interest to Mr. Johnson?

- Cash flow and cash cycle

Identify the types of feedback on which the operations control of a business depends.

- Informational feedback - Corrective feedback - Reinforcing feedback

________ requires an entrepreneur to assess whether the situation faced is one that is the same as it has been traditionally or if it is changing.

- The opportunity identification process

Identify the reasons that bootstrapping is common among small business start-ups.

- External equity capital is not available for most small business start-ups. - Banks do not loan to start-up businesses. - Owners often do not want to share ownership. - Owners usually want to be their own bosses. They do not want to have to answer to others concerning their businesses. - Owners typically do not want to be responsible to others for losses of the business.

_____ is the process of communicating within or to the organization about how the outputs worked or were received.

- Feedback

Which of the following is an advantage of offering credit to customers?

- Giving credit increases sales because people who buy on credit tend to buy more - Giving credit increases repeat business - Providing credit reduces the cost of selling because it is much less expensive to obtain repeat business than it is to get new customers - Even though giving credit raises some costs, the increased sales result in increased profit

Capital budgeting is _____.

- The process of deciding among various investment opportunities to create a specific spending plan

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. The ________ model introduced for the elevator pitch can be easily expanded to handle the pitch deck.

- Hook-solution-support-ask

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. A business plan that provides information to potential licensees is referred to as a(n) ________ plan.

- Invention

Which of the following statements regarding collateral are correct?

- The value of collateral is simply the estimated market value of the asset being used. - Most intangible assets are not thought to be good collateral. - Collateral can include stocks, bonds, and physical goods, like land.

Which of the following statements regarding limited liability companies (LLC) are correct?

- They have a choice, under federal law, of being taxed as either a corporation or a partnership - They are formed by filing required documentation with a state government - Owners can attract both debt and equity capital

Which of the following statements about tax credits are correct?

- They reduce amount of taxes that a business will pay. - They may be provided by federal, state, ore even local governments. - They are used to encourage investment in specific types of assets, economic activities, or other purposes.

Which of the following statements regarding unsecured debt are correct?

- The lender cannot seize any specific asset in the event of nonpayment. - A lender would generally have to file a lawsuit or force the business into bankruptcy to collect the unpaid debt. - These loans are often based on the business' character.

Which of the following is a strategy for maximizing the value of business's employees?

- Use overtime for times of temporary increased business. - Hire student interns, as they often are talented, motivated, and cost less than other employees. - Use of contractors.

True or false: When considering all types of possible business outcomes, bankruptcy, a workout, and a walkaway are forms of termination techniques.

- True

True or false: The SBIR and the STTR programs require that every U.S. agency that makes research grants provide a minimum of 3.2 percent of its grant budget to small businesses, as defined by the SBA.

- True

True or false: Equifax is one of the four primary CRAs in the United States.

- True (Equifax, Experian, Innovis, and TransUnion)

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. When a product or service is new to the industry or is itself creating a new industry, it is referred to as a(n) ________ business.

- Pioneering

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following pitch deck categories is sometimes given in the form of a user's experience?

- Problem slide

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following terms indicates that a product or service is being kept as a trade secret or is protected legally using patents, trademarks, copyright, or service mark?

- Proprietary technology

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following parts of a business plan is focused on creating new products or services and preparing new technologies, ideas, products or services for the firm's market?

- R&D

Which of the following are advantages of renting an asset when compared with buying the asset?

- Renting requires little or no cash investment on your part - Renting usually does not require an extensive (and expensive) application process as does borrowing money - Renting usually protects you from unexpected costs of repairs - Renting capital equipment provides an easy method to avoid ongoing costs if business conditions change - A business may be able to return a rented property, thus avoiding future rent payments - The timing and amount of cash outflows is specified in the rental contract

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. When a product or service is sold in a limited area, for a limited time, it is referred to as

- Test marketing

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following statements concerning pitch decks is correct?

- The contents of a solid pitch deck are very well known

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following statements is true of an elevator pitch?

- The goal of an elevator pitch is to sell the idea of a business to another

Which of the following statements regarding periodic inventory are correct?

- The time between counts is usually one year, but some businesses conducted them more often. - It meets the requirements of both local and federal taxing agencies. - It is the process of physically counting business assets.

True or false: The total cost of keeping inventory is the sum of the cost to buy the inventory, the cost to store, protect, and maintain inventory, and the cost of making an order to purchase inventory.

- True

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. Which of the following statements is not true of target customers?

- Usually you only have one type of target customer

Connie decides to open "Connie's Corner Café" and finds the ideal location for her venture. However, it appears that Connie will have to approach investors or bankers for financial backing. When she talks to her local bank manager, Mr. Johnson, he immediately asks for Connie's business plan. Connie is in trouble because she does not know what a business plan looks like. A(n) ________ is a very simple 5-10 word sentence that expresses the fundamental idea or goal of the firm.

- Vision statement

Born and raised in India, Rashmi has always enjoyed Indian cooking. As a matter of fact, cooking was her passion and she always enjoyed reading, learning, and experimenting with different ethnic cuisines. Ever since Rashmi's family moved to the United States, her cousins, friends, and other people at dinner gatherings have always commented that Rashmi should start a catering business. Realizing that her American friends may not be able to handle or like the Indian food because of its spiciness, Rashmi decided to make changes to the recipes to suit the local taste. Rashmi is seriously contemplating whether she should start a catering business—Tastes of India. Rashmi appears to be applying which element of the SCAMPER tool in her entrepreneurship ideas?

- Modify

______ are money that is owed to the business by customers who purchased products or services on credit.

- Accounts receivable

Which of the following is true of financial management for a business exit?

- Its main emphasis is on maximizing the value of the business for successors.

Which of the following are reasons or benefits business owners should use outside equity.

- You will reduce your own exposure to financial loss - Your business will not have increased costs in the form of interest - Bringing outside investors into an existing business can often re-energize it by providing new ideas, procedures, and processes