BF - CH 5 Questions

A person who buys a franchise is known as the: A. franchisee B. seller C. agent D. franchisor E. franchise

A. franchisee

What percentage of home-based businesses have no employees? A. Over 70% B. Over 90% C. Under 50% D. Under 30%

B. Over 90%

The Small Business Administration (SBA) defines a small business as "one which is independently owned and operated for profit and is not dominant in its field." How small must a firm be to not dominate its field? A. By the SBA's definition, the factors that determine the size of a business depend on the particular industry it is in. B. By the SBA's definition, the factors that determine the size of a business depend on a number of factors including the average annual growth of the business. C. By the SBA's definition, a "small" business must have profits of no more than $250,000 per year. D. By the SBA's definition, a "small" business must have no more than 50 employees and have average annual sales of not more than $1.7 million.

A. By the SBA's definition, the factors that determine the size of a business depend on the particular industry it is in.

What are the three key ingredients in small business survival as well as failure? A. Capital, management, and planning B. Planning, record keeping, and marketing C. Marketing, financing, and planning D. Human resource development, record keeping, and planning

A. Capital, management, and planning

Which of the following is not a management resource provided by the Small Business Administration? A. Free assistance in closing failed small businesses B. Counseling, courses, conferences, and workshops C. Free technical assistance D. Free publications

A. Free assistance in closing failed small businesses

All of the following are factors that encourage certain people to start new businesses, except: A. a reclusive nature B. independence C. a desire to determine one's own destiny D. a willingness to find and accept a challenge E. a family member(s) who has had been in business

A. a reclusive nature

Statistics show that most small business failures are related to A. poor management B. lack of proper financing C. the owner's lack of vision D. in-fighting among the owners

A. poor management

Studies show that the incidence of innovation among __(a)__ -business workers is significantly higher than among workers in __(b)__ businesses. Select A: limited liability, large, medium, small Select B: incorporated, large, medium, small

A. small B. large

While the __(a)__ owns the business, the __(b)__ controls it. Select A: franchisee, owner, corporations, partners Select B: customers, lender, members, franchisor

A: franchisee B: franchisor

____ is a new alternative to traditional financing that uses online sites to invite people to contribute. A. Selling life insurance policies to companies who become the policy beneficiaries B. Crowdfunding C. Credit cards D. Angel investing

B. Crowdfunding

Which category of industries includes retailing, wholesaling, transportation, and communications—industries concerned with the movement of goods from producers to consumers? A. Technological B. Distribution C. Production D. Service

B. Distribution

Which of the following is NOT an advantage of smallness in business? A. Personal relationships with customers and employees B. Easy to raise capital C. Ability to adapt to change D. Independence E. Simplified record keeping

B. Easy to raise capital

Every business must keep records of sales, profits and losses, fixed assets, contacts, tax returns, customers, and a variety of other information that affects the growth and operability of the business. Which of the following is true about small business? A. Record keeping does not vary much between large and small firms. B. Many small firms need only a simple set of records. C. Record keeping for large firms requires greater exactness than small firms because minute mistakes can have a cascading effect and cause the destruction of multiple business enterprises. D. Record keeping for small firms requires greater exactness than large firms because even minute mistakes can throw the business into financial straits.

B. Many small firms need only a simple set of records.

Basic rights and obligations are delineated in a franchise agreement. Which of the following is a franchising obligation? A. Use of the franchisor's copyrighted materials B. Requirement to purchase goods or products from the franchisor C. Rights to obtain supplies from nominated suppliers at special prices D. Follow guidelines established by the franchisor regarding exclusive territorial rights

B. Requirement to purchase goods or products from the franchisor

Which of the following is a way in which the Small Business Administration provides financial assistance to small businesses? A. Self-Employment Assistance (SEA) B. Small-Business Investment Companies (SBICs) C. Service Corps of Retired Executives (SCORE) D. Small-Business Development Centers (SBDCs) E. Better Business Bureau (BBB)

B. Small-Business Investment Companies (SBICs)

The growth of women and minorities in franchising is attributable to which of the following activities? A. More women and minorities graduating from business college B. Special outreach programs designed to encourage franchisee diversity C. Women and minorities having a greater work ethic than non-minority males D. Banks having loan programs targeted at women and minority business owners

B. Special outreach programs designed to encourage franchisee diversity

Franchising allows a ____ the opportunity to set up a small business relatively quickly, and because of its association with an established brand, a ____ outlet often reaches the break-even point faster than an independent business would. A. franchisee; franchisor B. franchisee; franchise C. franchise; franchisee D. franchisor; franchise E. franchisor; franchisee

B. franchisee; franchise

Small businesses enjoy several unique benefits that larger firms may not have such as A. personal relationships with customers and international competition B. the ability to adapt to change and simplified record keeping C. independence and paid vacation D. higher profits and limited risk of failure

B. the ability to adapt to change and simplified record keeping

Which of the following is a definition of "franchise"? A. A franchise is an agreement between two parties to carry on business for profit. B. A franchise is a large business that permits small businesses license to operate as if it were part of the larger business. C. A franchise is a license to operate an individually owned business as if it were part of a chain of outlets or stores. D. A franchise is a license to operate a unit of a business as if it were part of a chain of outlets or stores.

C. A franchise is a license to operate an individually owned business as if it were part of a chain of outlets or stores.

Jeffrey Inc. is a large business that produces off-road vehicle parts. In addition to this market stream, Jeffrey produces auto parts, boat parts, and parts for machinery and equipment. Inventions, LLC is a small business that focuses only on the off-road vehicle market and has created lighter weight, stronger, and more efficient parts for off-road vehicles. Its primary market is off-road racing which it believes will serve the dual purpose of showcasing its product and filling the needs of its customers. Inventions has significantly increased its market share in the off-road vehicle parts market over the years causing Jeffrey to revamp its marketing techniques and reanalyze its customer's needs. Which of the following is true about the relationship of small businesses to large businesses? A. When compared to large businesses, small businesses take more time to respond to customer's needs because they hesitate to invest in new product lines out of fear of having the line fail and losing money as a result. B. Large businesses must create different departments that resemble small businesses in order to effectively compete against small businesses. C. Small businesses challenge larger, established firms in many ways, causing them to become more efficient and more responsive to consumer needs. D. Small businesses can only dominate in an area of business if many firms join together to offer the same goods or services.

C. Small businesses challenge larger, established firms in many ways, causing them to become more efficient and more responsive to consumer needs.

A franchise arrangement includes a franchisor and a franchisee with the franchisor ____ to the franchisee A. supplying known and advertised management skills B. providing required training and capital C. granting a franchise D. providing management

C. granting a franchise

Knowledgeable entrepreneurs choose areas with which they are familiar. These are most often the more established industries that require only a ____ investment and some special ____. A. low initial; on-the-job training B. mid-sized initial; on-the-job training C. low initial; skills or knowledge D. high initial; industrial tools

C. low initial; skills or knowledge

Sears, Roebuck & Co., and General Motors rely heavily on ______ to provide merchandise, parts, supplies, and other goods and services. Companies like these buy parts and assemblies for these businesses because it is less expensive than manufacturing them in their own factories. A. international businesses B. local businesses C. small businesses firms D. subsidiaries

C. small business firms

Franchising agreements fall into three general categories, which of the following is not one of those categories? A. A manufacturer franchises retail stores to sell its products. B. A franchisor supplies brand names, techniques, or other services instead of a complete product. C. A producer licenses distributors to sell a given product to retailers. D. A distributor franchises the channels of distribution to franchisees.

D. A distributor franchises the channels of distribution to franchisees.

Which of the following is an accurate statement about business profitability? A. According to the SBA, small businesses can retain all profits and have low costs associated with their operations which contributes to their profitability. B. Large businesses are more profitable than small business and this increases with the number of employees hired. C. Large businesses and small businesses are about equal in their profitability. D. According to the SBA, the most profitable companies in the United States are small firms that have been in business for more than ten years and employ fewer than 20 people.

D. According to the SBA, the most profitable companies in the United States are small firms that have been in business for more than ten years and employ fewer than 20 people.

____ businesses are important to the U.S. economy because, among other things, they employ about half of all private sector employees, pay 42 percent of total U.S. private payroll, and hire 37 percent of high-tech workers (scientists, engineers, computer programmers, and others). A. Incorpoated B. Large C. Medium D. Small

D. Small

____ are business clinics, usually located on college campuses that provide free counseling and training for owners of small businesses. A. Better Business Bureau (BBB) B. Self-Employment Assistance (SEA) C. Small-Business Investment Companies (SBICs) D. Small-Business Development Centers (SBDCs) E. Service Corps of Retired Executives (SCORE)

D. Small-Business Development Centers (SBDCs)

Having a business plan causes a new business owner to think through all of the aspects of business ownership, costs, capital needed for start-up, and can be used to review company goals and benchmark when they are met. Which of the following is true about the company and industry portion of the business plan? A. This section of the business plan is a one- to two-page overview of the entire business plan, and explains why the business will succeed. B. This section of the business plan explains what facilities will be needed and why, what the space requirements will be, how much capital equipment must be purchased and of what kind and character, the size of the labor force, how inventory control will be maintained, and what the purchasing requirement will be. C. This section of the business plan provides the basic information such as the name, address, and phone number of the business; the date the plan was issued; and a statement of confidentiality. D. This section of the business plan gives the background of the company, explains the legal business form it will take, provides information about the products or services to be offered, reviews potential customers, current competitors, and the business's future.

D. This section of the business plan gives the background of the company, explains the legal business form it will take, provides information about the products or services to be offered, reviews potential customers, current competitors, and the business's future.

Several factors contribute to the entrepreneurial spirit in the United States, but the most important is the personal characteristics of the individuals who start businesses. Studies have shown that personal factors in small-business success include family background, willingness to accept a challenge, A. independence and social status B. age and gender C. and wealth D. and a desire to determine one's own destiny

D. and a desire to determine one's own destiny

John had a good idea for a candy manufacturing business. He decided that he wanted to take the risk, become an entrepreneur, and start his own business. Now, ten years later, John's candy company has 20 locations all over the United States and employs nearly 1,000 people. This example illustrates: A. that there is a large demand for candy in the United States B. that small businesses have little effect on the economy C. the risks associated with entrepreneurship D. how small business fuels job creation and innovation E. that entrepreneurs are of superior intelligence

D. how small business fuels job creation and innovation

A business plan is essential for starting a new business because it A. provides information to the Internal Revenue Service B. helps the business owner track, monitor, and evaluate vendors C. can serve as a communication tool for employees and investors D. is a guide for the person starting a business

D. is a guide for the person starting a business

According to the U.S. Office of Management and Budget, ____ of the major technological advances of the 20th century originated with individual inventors and small companies. A. nearly all B. less than 10% C. about one-fourth D. more than half

D. more than half

Which of the following is the most likely reason that a small-business owner may become frustrated as a franchisee? A. Site selection B. Reduced stress and responsibility C. Creating and managing national advertising D. Management training and support E. Excessive restrictions resulting in less freedom

E. Excessive restrictions resulting in less freedom

The government agency that advises and assists small businesses by providing management and financial assistance including counseling on improving operations and assisting with obtaining debt financing is known as the _____. A. Small-Business Development Centers (SBDCs) B. Service Corps of Retired Executives (SCORE) C. Small-Business Institutes (SBIs) D. Better Business Bureau (BBB) E. Small Business Administration (SBA)

E. Small Business Administration (SBA)

Franchises offer people starting a business the advantage of a recognized name, management assistance, and A. a lot of regulations B. no royalties or fees C. large territories without competition D. discounted fees E. a greater chance for success

E. a greater chance for success

A franchisee acquires rights to all of the following, except: A. national advertising by the franchise B. a name C. a logo D. methods of operation of the business E. other franchisee's employees and management

E. other franchisee's employees and management

Which of the following is considered a shortcoming of owning a franchise? A. Guidance and advice from the franchisor B. Possible market saturation C. National and local advertising programs D. Can start a business with limited capital E. Centralized buying power

B. Possible market saturation

____ are independently owned and operated, not dominant in their field of operation, and meet certain standards of size in regard to number of employees or average annual sales. A. Franchises B. Small businesses C. Joint ventures D. Syndicates E. Open corporations

B. Small businesses

____ franchises occur when two franchisors offer their products together; this is becoming a new small-business trend. A. Twin B. Matching C. Dual-branded D. Partnering

C. Dual-branded

According to the authors, franchises may become unsuccessful because the franchisor A. fail to maintain proper relationships with their lender B. did not understand the market and failed to provide adequate training to franchisees C. expand too rapidly D. lack the resource to properly plan the franchise operation

C. expand too rapidly