Chapter 5 Questions

Diego has invested $50,000 in Luca's restaurant business, Luca's Seafood LLC, in Miami, Florida. Although the restaurant has struggled in the last few years, it is not because of a lack of customers; usually, there is a "wait list" to eat there. The restaurant needs to expand its seating capacity to increase its profits. Diego is convinced that with the extra $50,000 investment, Luca's Seafood will be positioned for long-term success, and he will "reap the reward" of seeing his investment grow. In this scenario, Diego is which of the following? A) A venture capitalist B) A debt financer C) A franchisor D) A crowdfunder

A) A venture capitalist

Samuel would like to expand his T-shirt printing and sales business internationally, and he plans to contact the Small Business Administration (SBA) to determine how the organization can assist him in his expansion efforts. Which of the following is not a service the SBA provides to boost small business participation in global markets? A) Arranging for crowdfunding of up to $10 million for small-business owners B) Counseling small firms on how and where to market oversees C) Providing guarantees of up to $5 million in loans to small-business owners D) Bringing small U.S. firms into direct contact with potential overseas buyers and partners

A) Arranging for crowdfunding of up to $10 million for small-business owners

Suppose your friend Arthur wants to quit his $90,000 per year job at an information technology firm to open his own music shop. If you want Arthur to "keep his day job" and refrain from opening his own shop, you should share with him which of the following recognized disadvantages of small business ownership? A) Risk of failure B) Complex record-keeping requirements C) Unlimited ability to raise capital D) Unlimited potential

A) Risk of failure

Which of the following is not a recognized component of a business plan? A) SBIC list B) Introduction C) Exit strategy D) Benefits to the community

A) SBIC list

Your friend Suhani would like to open her own wedding venue business. Before Suhani does so, she comes to you seeking a realistic preview of what she may face as an entrepreneur and a small business owner. Which of the following is correct information you can share with Suhani? A) Starting a small business requires much more than optimism and a good idea. B) Small businesses inherently possess the ability to expand. C) By their very nature, entrepreneurs possess the management skills required to run a business successfully. D) Entrepreneurs should always adopt a "fast growth" mindset.

A) Starting a small business requires much more than optimism and a good idea.

Which of the following is not correct regarding Small Business Administration (SBA) management assistance? A) The SBA pays Service Corps of Retired Executives (SCORE) advisors for their services to small business owners. B) Small-business institutes (SBIs) are groups of senior and graduate students in business administration who provide management counseling to small businesses. C) The SBA issues publications dealing with hundreds of topics of interest to current and prospective managers of small firms, and most of these publications are available from the SBA free of charge. D) Small-business development centers (SBDCs) are university-based groups that provide individual counseling and practical training to owners of small businesses.

A) The SBA pays Service Corps of Retired Executives (SCORE) advisors for their services to small business owners.

Flynn wants to start a new dog-grooming business. Which of the following is not a recognized factor that may influence Flynn to start his small business? A) The economic safety and security associated with starting a small business B) Being between the ages of 24 and 44 years old C) The desire to determine one's own destiny D) The desire for independence

A) The economic safety and security associated with starting a small business

Suppose fast-food chain McDonald's grants a franchise to Gateway Enterprises LLC to operate a McDonald's restaurant in St. Louis, Missouri. In this scenario, McDonald's is which of the following? A) The franchisor B) The venture capitalist C) The franchisee D) The small-business investment company

A) The franchisor

Shanice hopes to open a tool and equipment supply company, and her financing plan relies heavily on raising funds by promising investors a share of future profits and an ownership stake in the business. What type of investment funding is Shanice relying on for the start-up and overall success of her business? A) Debt financing B) Equity financing C) Crowdfunding D) Venture capital

B) Equity financing

Your friend Giulia plans to open her own computer-repair business. You have informed Giulia that to increase her likelihood of small business success, she will first need to develop a carefully constructed guide regarding the restaurant's management team, labor force, marketing, and finances. To which of the following were you referring in making this recommendation to Giulia? A) The franchise agreement B) The business plan C) The SBIC sheet D) The SCORE sheet

B) The business plan

Suppose cleaning and maintenance company MaidPro grants a franchise to Big Apple Cleaners LLC to operate a franchise in New York City. In this scenario, Big Apple Cleaners LLC is which of the following? A) The franchisor B) The franchisee C) The venture capitalist D) The small-business investment company

B) The franchisee

Which of the following is correct regarding the small-business sector in the United States? A) It typically takes more than one month to establish a business as a legal entity. B) There are approximately 31.7 million businesses in this country. C) Approximately two-thirds of businesses launched between 1994 and 2018 have survived at least five years. D) It typically takes approximately $3,000 to establish a business as a legal entity.

B) There are approximately 31.7 million businesses in this country.

Since she was 12 years old, Ama has dreamed to own and operate a food truck that will sell traditional West African cuisine. Ama's desire to create a new business is known as which of the following? A) SCORE B) Venture capitalism C) Entrepreneurial spirit D) A business plan

C) Entrepreneurial spirit

Camille would like to open a small consignment shop in her hometown of Lansing, Michigan. Which of the following is an accurate statistic regarding female-owned businesses in the United States that will likely encourage Camille to open her consignment shop? A) Women are starting 180 businesses each day. B) There are now nearly 1.3 million female-owned businesses. C) Female-owned businesses generate $1.9 trillion in revenues each year. D) Women currently own 32 percent of all businesses.

C) Female-owned businesses generate $1.9 trillion in revenues each year.

Your friend Shiro wants to open an automotive tire shop, but he is not familiar with the financial aspects of owning and operating a small business. You would like to give Shiro a realistic assessment of the financial challenges and opportunities he may face. Which of the following is correct regarding the financial aspects of entrepreneurship and small business ownership? A) Entrepreneurs need to have only the capital to open a business in its start-up phase. B) Even a series of cash flow predicaments rarely ends in business failure. C) One cash flow obstacle often leads to others. D) Most small businesses generate a profit in their first year of operation.

C) One cash flow obstacle often leads to others

Iben has been operating a dry-cleaning business for the past 32 years. Iben is going to retire next year, and he plans to transfer ownership of the business to his son Toben. Prior to the transfer, Iben wants to emphasis to Toben that the survival of a small business can be challenging, depending in many respects on the small business owner's ability to use the key "ingredients" available to them both effectively and efficiently. Which of the following is not a key ingredient in the survival of a small business? A) Funding B) Management C) Qualified immunity D) Planning

C) Qualified immunity

Which of the following is correct regarding global perspectives in small business? A0 Dwindling trade barriers are creating opportunities for large, but not small, businesses. B) Increasingly interdependent national economies are creating opportunities for large, but not small, businesses. C) Technology now gives small businesses the leverage and power to reach international markets that were once limited solely to large corporations. D) For small U.S. businesses, the world is becoming larger.

C) Technology now gives small businesses the leverage and power to reach international markets that were once limited solely to large corporations.

Which of the following is not correct regarding Small Business Administration (SBA) financial assistance? A) The SBA makes a special effort to assist those in underrepresented groups who want to start small businesses or expand existing ones. B) Most of the SBA's business loans are made by private lenders. C) The SBA distributed nearly $1 billion in Paycheck Protection Program loans to help small businesses keep employees on the payroll and stay open during the COVID-19 pandemic. D) The average size of an SBA-guaranteed business loan is about $300,000.

C) The SBA distributed nearly $1 billion in Paycheck Protection Program loans to help small businesses keep employees on the payroll and stay open during the COVID-19 pandemic.

Which of the following is a recognized component of a business plan? A) The SBIC sheet B) The franchise agreement C) The executive summary D) The SCORE sheet

C) The executive summary

Which of the following is correct regarding the importance of small businesses to the United States economy? A) They employ about two-thirds of all private-sector employees. B) They have generated 45 percent of net new jobs over the past 20 years. C) They represent 99.9 percent of all employer firms. D) They pay 60 percent of total U.S. private payroll.

C) They represent 99.9 percent of all employer firms.

Which of the following is not a recognized category of a franchising arrangement? A) A franchisor supplies band names, techniques, or other services rather than a complete product. B) A manufacturer authorizes a number of retail stores to sell a certain brand-name item. C) A producer licenses distributors to sell a given product to retailers. D) A franchisor and a franchisee form a limited partnership to produce and sell a good or a service.

D) A franchisor and a franchisee form a limited partnership to produce and sell a good or a service.

In his first Introduction to Business class, Hugo's professor noted in passing that there are several advantages associated with owning a small business, and since Hugo would eventually like to open his own personal-training business, he is eager to learn more. Which of the following is not a recognized advantage of small business ownership? A) Simplified record keeping B) Personal relationships with customers and employees C) The ability to adapt to change D) A low risk of failure

D) A low risk of failure

Weizhe has grown tired of his high-tech job in Silicon Valley, California. He plans to start up a business, Weizhe the Wanderer LLC, which involves him purchasing a recreational vehicle (R.V.), touring the country, and posting vlogs on YouTube for viewers to enjoy that will compensate him for his travels. To get started, Weizhe is going to post a description of his business on the online site Kickstarter, hoping that viewers will contribute the $130,000 required for him to purchase the R.V. Weizhe plans to rely on which of the following types of funding to get his business started? A) Equity financing B) Venture capital C) Debt financing D) Crowdfunding

D) Crowdfunding

Which of the following data is correct regarding small businesses in the United States? A) Approximately 40 percent of all small businesses are in the production industries. B) Between 2000 and 2019, small businesses were responsible for 2.5 million net new jobs. C) More than 90 percent of the major technological advances of the 20th raised to the th power century originated with individual inventors and small companies. D) Distribution industries account for approximately 33 percent of all small businesses.

D) Distribution industries account for approximately 33 percent of all small businesses.

On Saturday, Chun told her friend Rishaan that she desired to open her own clothing store, but she expressed reservations to Rishaan about the responsibilities associated with owning and operating a small business. If Rishaan wants his friend Chun to "follow her dreams" and open her own clothing store, Rishaan should share with her which of the following recognized advantages of small business ownership? A) The low risk of failure B) The ability to raise capital C) Unlimited potential D) Independence

D) Independence