Business Midterm Ch.5-7

Which of the following is ALWAYS TRUE about the purchases of existing business?

Once under new ownership, any underlying problems are the responsibility of the new owner.

Which of the following is ALWAYS TRUE about the purchases of existing businesses?

Once under new ownership, any underlying problems are the responsibility of the new owner.

Which of the following statements is FALSE about the kind of workers that small businesses employ?

Small businesses employ a smaller proportion of part-time workers than larger firms.

Which of the following is NOT true of business incubators?

Some business incubators have been started by the Small Business Administration.

Which of the following statements BEST explains why an initial purchase price of an existing business could be higher than the immediate up-front costs associated with a startup?

Suppliers, staff, equipment and inventory are in place to facilitate taking over the business.

Which of the following statements is TRUE?

The Small Business Administration offers free online training to small business owners.

Alisha has just completed a program in floral design and plans to open her own business as a florist. As part of her preparation, Alisha is working on her operational plan. Which of the following aspects of her business would be included in her operational plan?

staffing

James lives near a university and observes that almost every student uses a cell phone. He decides to open a small shop offering repair services for cell phones. His shop is an instant success. James has satisfied an area of need called ________.

an opportunity niche

When a wealthy individual invests his or her own money into a business project or startup company with little intention to influence decision making, he or she is MOST often called a(n) ________.

angel investor

A ________ business is one that has at least 20 percent sales growth per year for five years, starting with a base of at least $100,000.

gazelle

Martha has just bought a video store franchise. Which of the following factors probably did NOT affect her decision to buy a franchise instead of starting up her own business?

higher franchise startup costs

When naming a business, which of the following approaches would NOT be a mistake?

hiring a company to create a name

Studies show participation in an incubation program ________.

increase the success rate of a startup company by as much as 90 percent

In determining the value of an existing business, one of the potential sources of value is the current owner's goodwill. In this case, goodwill refers to ________.

intangible assets such as customer service

Which of the following types of entrepreneurs does NOT become involved in starting his or her own business?

intrapreneur

Since Donna was laid off from her job a few months ago, she has enjoyed having more time to relax, exercise, and be with her family. Now she is wondering whether she should start her own business. Donna should consider purchasing a franchise ONLY if she ________.

is prepared to handle the heavy workload that comes with a franchise

Which of the following is the BEST example of entrepreneurial innovation?

launching the first Starbucks store

Amy is the founder of a small IT firm that specializes in social networking applications. She meets weekly with the members of her development team to solicit their ideas, address any problems they are having, and provide motivation and encouragement. Amy is demonstrating which characteristic of a successful entrepreneur?

leadership and communication skills

Small business owners interested in venture capital funding should know that venture capitalists ________.

look for the potential of a public stock offering before investing in a company

Advisory boards generally do NOT have the authority to ________.

make decisions

Banks may offer lines of credit to help the new business owner ________.

make payroll when business is slow

Marge designs an innovative and fashionable laptop bag, but feels she lacks experience to turn her creation into a viable business. Marge's BEST option is to ________.

put together an entrepreneurial team to market the bag

Joe is very confident about his purchase of a franchise from a well-known full-service restaurant company. What is one of the things he MOST likely did before he bought the franchise?

spent months researching the franchiser's background and track record

Kyle is an entrepreneur who runs his own advertising agency. He can see the whole picture of what is involved in growing his company, and he has developed a solid plan for every aspect of the business, including production, financing, and marketing. This approach to his business indicates that Kyle is a ________.

system thinker

Aside from legal liability, what other primary factor should a small-business owner consider before deciding which structure to choose for his business?

tax considerations

Technology has had a significant impact on small businesses because ________.

the PC and the Internet have made starting a new business much easier

Small business owners can seek professional advice at no cost through ________.

the Service Corp of Retired Executives

Rhonda does not know how to go about finding financing for her struggling new business. Which of the following resources would be the BEST place for her to learn more about obtaining financing?

the Small Business Administration

The government agency whose sole purpose is to cater to the needs of small businesses is ________.

the Small Business Administration

________ of all startups fail in two years.

66 percent

Which of the following is a potential disadvantage of teaming up with a business partner?

A partner expects a share of the business profits.

What would be the GREATEST advantage of having a partner as opposed to having an advisory board?

A partner would be more committed to the success of the business than an advisory board.

Which of the following is NOT an advantage of buying an existing business?

An existing business has less competition.

Janet planned to purchase a McDonald's franchise. Meanwhile, Jason decided to open his own sandwich shop. Both decided to finance their new business ventures by applying for bank loans. Janet's loan application was approved, but Jason's was denied. Which of the following is the most likely explanation for these results?

Banks view franchises as having fewer risks than other startup businesses.

________ support(s) startup businesses by offering resources such as administrative and technical support and business networking.

Business incubators

Which of the following statements about small business failure is FALSE?

Business owners may fail if they take excessive time in creating a business plan.

Timothy is the 60-year-old founder of a publishing company that has over $2 million in annual gross sales. Is he eligible to have a mentor through the Entrepreneurs Organization?

No, because he is over 50 years old.

Which of the following is an example of the role that small businesses can play in fostering innovation?

Dell Computer's sale of computers directly to consumers

________ is the process of performing research and analysis of a business to uncover any hidden problems associated with it.

Due diligence

Which statement BEST describes why a successful entrepreneur needs to be flexible?

Entrepreneurial ventures involve risky situations and unexpected events.

Which of the following statements is TRUE about franchising?

Franchisees have relatively lower risk than other small business startups.

Fred started his new landscaping business with a commercial loan. He uses his credit card to pay for weekly supplies such as fertilizer and mulch. Business growth has been slow and Fred is having a difficult time keeping up with his monthly loan and credit card payments. He is now considering borrowing against his home to stay current with his initial loan and for other needed expenses. Fred's business is MOST at risk because ________.

Fred is taking on too much debt.

Jodi owns a business that designs and creates lingerie. In an effort to get her product into as many stores as possible, Jodi has been lenient on the terms of collection, allowing stores at least 30 days credit. As a result, it is taking her too long to collect payments and her revenues are very low. What is the MOST likely cause of Jodi's business difficulties?

Jodi is not adequately managing the financial aspects of her business.

________ are venture capital firms licensed by the Small Business Administration to make equity capital or long-term loans available to small companies.

Small Business Investment Companies

Which of the following BEST explains why small businesses can be so effective in fostering innovation?

Small business' flexibility allows them to react quickly to changing market needs and trends.

Which of the following is NOT a symptom of potential small business failure?

The owner lacks college-level business training.

Joanne is considering purchasing an existing day spa. Which of the following should she assume about the current employees of the day spa?

There may be unanticipated problems with the current employees that Joanne could inherit if she buys the day spa.

What is the worst thing that could happen to small business owners who use credit cards as a source of financing?

They might spend more than they can afford to pay back.

What is the most common reason small business owners neglect to seek outside help when starting a business?

They think that they cannot afford professional advice.

Which of the following questions would provide the BEST information to help you decide whether or not to buy a business?

Why is the business for sale?

Alex Garcia has an idea for an internet technology business that involves innovative search engine tools. He was referred to an organization that helps startup businesses by offering resources such as administrative services, technical support, and business networking. This type of organization is called ________.

a business incubator

A franchise is a method of doing business in which ________.

a company's products or services are sold to independent third-party operators under the company's name

Maria is the owner of Pet Heaven, a new pet daycare, grooming and boarding business. Maria envisions her business expanding to five locations in her state within three years. To help her succeed, which of the following does Maria MOST need?

a formal business plan

An advisory board is composed of ________.

a group of individuals who offer guidance to the new business owner

An entrepreneurial team is ________.

a group of individuals with varied experiences and skills that come together to form a new venture

If you were a venture capitalist, which of the following start-up businesses would you be most likely to fund?

a producer of unique iPhone applications

If you were a venture capitalist, which of the following startup businesses would you be most likely to fund?

a producer of unique iPhone applications

Which of the following is NOT a disadvantage of franchising?

brand recognition

which of the following is NOT a disadvantage of franchising?

brand recognition

A ________ is a formal document that states the goals of the business as well as the intended process for reaching those goals.

business plan

Before Fred started a new business venture, he weighed the factors that could help him succeed as well as the difficulties or setbacks he might face. Which characteristic of a successful entrepreneur is Fred demonstrating?

calculated risk taking

Ever since Kim opened her own nail salon, she has made all important decisions about how it is run. She recently launched a Web site to market her services and a new line of organic nail products. Which reason for starting a small business is BEST displayed by Kim's situation?

control

Gary Smith, owner of a small business in San Diego, heard that the Small Business Administration will hold a series of workshops in his city. Which of the following topics is MOST likely to be included in the Small Business Administration's workshops?

creating a business plan

All of the following are potential benefits of using credit cards to obtain funds for starting a business EXCEPT ________.

credit cards have low interest rates on unpaid balances

A(n) ________ is someone who takes the risk of creating, organizing and operating a business, usually to satisfy an unmet need in the marketplace.

entrepreneur

the majority of franchises operate within which industry?

fast food

Which of the following should a business owner create monthly?

financial statements and budget reports

Since Ben opened his own computer repair business, he has had to take a lot of time off to care for his mother who has been seriously ill. In his old job, he would not have been allowed to take so much time off. What advantage of owning a small business is BEST displayed by Ben's situation?

flexibility

Which of the following does a franchise company offer to people who want to start a business?

marketing and financial tools to run a business

Identifying your competitors is part of a(n) ________.

marketing plan

Rashan has been working as a pharmacist at a large drug store chain. He would like to open his own small pharmacy but is not sure if he could be successful given the predominance of large competitors. What part of his business plan would best address his concern?

marketing plan

A(n) ________ is a type of entrepreneur who prefers to keep his or her business small.

micropreneur

Harvard student Mark Zuckerberg came up with the idea for Facebook as a way to provide a forum for students on his college campus to network and display pictures of themselves and their friends. Today, Facebook has a market value of approximately $750 million and media giants such as Google and Yahoo have been trying to outbid each other for ownership. What reason for starting a small business does the creation of Facebook BEST represent?

opportunity knocks

Volunteers from the Service Corp of Retired Executives provide a variety of services to small businesses. However, volunteers do NOT ________.

participate in decision making

A(n) ________ offers the company expertise that a new business owner does not possess in exchange for a share in its profits and liabilities.

partner

Johanna plans on being the sole proprietor of a home-based sales consulting business. Since she will work out of her home, her startup costs should be low. Which type of financing would be BEST for her to use for the start up of her business?

personal savings

Maggie wants to start a fine dining restaurant in her town and dreams someday of having a chain of restaurants all over the country. She can be considered a growth entrepreneur because she ________.

plans to have her business expand beyond her local area

If a business is at risk of failing because it has taken on too much debt, the root cause of such excess debt is MOST likely to be ________.

poor business management

Which of the following is LEAST likely to be a characteristic of successful entrepreneurs?

prefers not to work with other people

Sam is eager to start a local magazine that will include articles about health and fitness and provide a place for local health and fitness professionals to advertise their services. Which of the following does he NOT need to include in his business plan?

product plan

When borrowing money from friends or family members, you should ________.

provide the person from whom you borrowed money a document indicating how and when you intend to pay them back

Which of the following should you do when borrowing money from friends or family to finance a new business?

provide them with a contingency plan for repayment

All of the following are reasons why people start small businesses EXCEPT ________.

reduced levels of responsibility

All of the following are reasons why people start small businesses EXCEPT _________.

reduced levels of responsibility

Regardless of how well or poorly a franchise business is doing, franchisees must give the franchiser a monthly ________.

royalty fee

Isaac is a franchise owner of a fast food restaurant. When another franchise is accused of using artificial meat in its hamburgers, sales at Isaac's franchise location drop dramatically. What disadvantage of franchising is BEST demonstrated by Isaac's situation?

sharing common problems

Isaac is a franchise owner of a fast food restaurant. When another franchisee is accused of using artificial meat in its hamburgers, sales at Isaac's franchise location drop dramatically. What disadvantage of franchising is BEST demonstrated by Isaac's situation?

sharing common problems

A(n) ________ is defined as a business that is independently owned and operated and is not dominant in its field of operations.

small business

The quickest and easiest way to start a small business is by establishing a ________.

sole proprietorship

Peter has applied for a loan to purchase a franchise of a popular convenience store in an area that is experiencing rapid population growth. If the loan is approved, it will MOST likely be because ________.

there is less risk associated with a franchise than with an independent business startup

Many e-commerce businesses failed in the late 1990s because ________.

they did not plan for rapid growth and lacked sufficient inventory to fulfill orders

Small businesses are important to the economy because ________.

they employ approximately 50 percent of the private workforce in the United States

The major advantage of borrowing money from friends or family to start a business is ______.

they will not usually expect a high rate of return on their investment

The major advantage of borrowing money from friends or family to start a business is ________.

they will not usually expect a high rate of return on their investment

If you are planning to start a new business, how long should you realistically expect it to take for your business to earn a profit?

three to five years

Of the following four reasons why new small businesses may fail, which is the MOST common?

too much debt

The Service Corp of Retired Executives is composed of ________ who can provide advice to small business owners.

volunteers

The Service Corps of Retired Executives is composed of _____ who can provide advice to small business owners.

volunteers

Lifestyle entrepreneurs ________.

want flexibility and freedom in the way they balance their personal and work lives