Chapter 6 LearnSmart Quiz

2. Reed Hastings created Netflix. His inspiration came from the fact that he had to pay a sizeable late fee for returning a DVD beyond the due date at a rental store. It took a few tries to develop the winning business model. Which statement accurately describes his key to success? Multiple Choice His idea solved a problem. The government increased the charges on late fees to consumers. No other business had the capability to offer the same product. He obtained the only streaming video license available in the U.S.

His idea solved a problem. Explanation: Hastings turned his problem into an opportunity. He knew if he was interested in a better way of renting movies others likely would also have the same need.

12. While on a trip to South Africa, Elena was impressed with colorful woven outdoor placemats, floor mats, chair cushions, and umbrellas that local artisans were weaving. Upon returning to the U.S., she was confident that U.S. consumers would be as intrigued by these accessories as she was. Elena decided to explore the possibility of starting an import business to bring these products to the U.S. Which of the following statements seems to be good advice for Elena? Multiple Choice Learn from others who import goods from abroad, and particularly from Africa. Make certain that you have twice the cash necessary to make your first purchases. Before performing a feasibility study, form your legal business status. Since most import businesses are also export businesses, find a U.S. product South Africans would be willing to buy.

Learn from others who import goods from abroad, and particularly from Africa. Explanation Good advice is to try to find others in the same or similar business and learn from them. Also, there might be opportunities to apprentice with others in the import business before venturing on your own.

16. What are the primary sources of funding for entrepreneurs? Multiple Choice Personal savings and individual investors such as family Finance companies and banks The Small Business Administration Former employers and the State Economic Development Authority

Personal savings and individual investors such as family Explanation The primary source of funding for entrepreneurs is their own personal savings plus funds from friends and family, and individual investors.

8. Why do experts agree that small-business management and large-business management are similar in practice? Multiple Choice Large and small businesses still require several employees. Small businesses and large corporations raise capital in the same manner, and look to the same sources for that capital. Similar to large businesses, small business have concerns about obtaining capital and good marketing and management practices. Successful small businesses and large businesses typically grow at the same rate, and neither has the desire to remain the same size that it is today.

Similar to large businesses, small business have concerns about obtaining capital and good marketing and management practices. Explanation Large and small businesses alike are concerned with raising capital, maintaining a good flow of information, marketing, and good management.

9. Which of the following is a FALSE statement about small business? Multiple Choice Small businesses account for more than 50 percent of GDP (gross domestic product). The vast majority of nonfarm businesses in the U.S. are considered small. The first job for most Americans is unlikely to be in a small business. The majority of the country's new jobs are in small business.

The first job for most Americans is unlikely to be in a small business. Explanation About 80 percent of U.S. workers find their first jobs in small businesses.

24.There are many reasons why small-business owners don't go international. Which of the following is NOT one of those reasons? Multiple Choice They don't know how to get started. Financing is often difficult to find. Paperwork is often overwhelming. The market doesn't have great potential.

The market doesn't have great potential. Explanation The global market is made up of over 7 billion potential customers with many emerging economies with eager buyers.

13. The primary concerns when first starting your business are Multiple Choice marketing and accounting. planning and human resources. financing and planning. financing and marketing.

financing and planning Explanation Although knowing your customers, managing employees and keeping records are vitally important, planning and financing are the primary concerns when first starting your business.

23. Small businesses often have advantages in international markets. One advantage is Multiple Choice a greater expertise in managing the paperwork required to sell goods in international markets. a better understanding of the cultural differences involved. the ability to obtain financing through the International Monetary Fund. individualized customer service as opposed to impersonal corporate bureaucracies.

individualized customer service as opposed to impersonal corporate bureaucracies. Explanation Small companies can give more personal service and more undivided attention, because each overseas account is a major source of business to them.

5. Darrell works for a company that promotes an entrepreneurial culture. Employees are encouraged to discuss new ideas. Development time is provided on the job for those ideas that float to the top. Employees who use their creative talents to generate ideas and create products within large companies are called Multiple Choice brainstormers. intrapreneurs. analyzers. patent directors.

intrapreneurs. Explanation Intrapreneurs are employees who are encouraged to perform entrepreneurial activities within a corporation.

10. A small business Multiple Choice must have fewer than 100 employees to be considered small. is considered small relative to other businesses in its industry. must make less than $10 million per year to be considered small. should not have more than three locations in a region.

is considered small relative to other businesses in its industry. Explanation A small business is considered small only in relationship to other businesses in its industry.

4. Mandy has perfected the art of glass-blowing. She has made gifts for her friends for years and has always gotten rave reviews. She decided to make a business out of her craft. She plans to run the business out of her home so she can be there to raise her children and still participate in all of their activities. Mandy is not interested in growing a large business; she just wants to make extra income. Mandy is best described as a(n) intrapreneur. business incubator. enterprise zone. micropreneur.

micropreneur. Explanation: Micropreneurs are entrepreneurs willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle.

1. Entrepreneurs emphasize the importance of believing in your own ideas because in the process of developing those ideas you are likely to hear from skeptics. Characteristically, they also know that success or failure is "on them." These attributes are described as Multiple Choice action-oriented and highly energetic. self-directed and self-nurturing. self-contained and self-centered. a high-stakes roller and highly energetic.

self-directed and self-nurturing. Explanation: Self-directed entrepreneurs know they must be self-disciplined. Success or failure is in their hands. Self-nurturing entrepreneurs believe in their own ideas.

11. Miriam Njunge wants to start a small business importing some products from her native Kenya. Before she starts, some good advice to Miriam would be Multiple Choice talk to others who have been or are in the import business. get a loan from a bank right away. find a business to buy as soon as possible. incorporate the business immediately.

talk to others who have been or are in the import business. Explanation Before starting a business, it's helpful to take classes in business and entrepreneurship and talk to others who have already done it.

21. A small business advantage is Multiple Choice the ability to quickly adapt to customer needs. friends can barter for goods and services the business needs. colleges are more amenable to helping small businesses because they prefer working and writing about them than their larger counterparts. small businesses are more likely to employ part-time workers and use telecommuting.

the ability to quickly adapt to customer needs. Explanation Understanding the market is very important for small-business success. Due to their size and flexibility, small businesses can often adapt quicker to changes in the market, including changes in preferred product offerings and delivery methods.

25. While cultural differences and bureaucratic paperwork for foreign governments make the prospect of global trade difficult for small businesses, there is one bright spot on the horizon that has brought global trade closer to home. Small businesses can now Multiple Choice buy health insurance for employees abroad that is much cheaper than in the United States. avoid U.S. labor laws that do not permit them to employ child labor. use technology such as PayPal to fulfill orders, which gives them some assurance of payment. delegate the details of going global to U.S. government employees who are mandated to assure small businesses succeed abroad.

use technology such as PayPal to fulfill orders, which gives them some assurance of payment. Explanation Technological advances have made it much more feasible for small businesses to trade abroad. PayPal, for one, allows for prompt international payments.

18. According to the textbook, one of the drawbacks of using venture capital is Multiple Choice venture capital firms cannot give the small business owner any advice. they don't know your customers. venture capital firms may ask for a high stake in your business. the venture capital firm asks for very high interest rates on money loaned.

venture capital firms may ask for a high stake in your business. Explanation In exchange for taking a large risk with their investments, venture capitalists may ask for a large chunk of the business.

19. For a market to exist, there must be potential buyers Multiple Choice and a product that is safe and inexpensive. who have a willingness and the resources to buy. and retail stores which are willing to carry the product. who are looking for reasonable prices and financing.

who have a willingness and the resources to buy. Explanation When starting your business, you must have customers with unsatisfied wants who have the resources and desire to buy.

20. What is SCORE? Multiple Choice A government agency that helps establish empowerment zones and incubators to assist small businesses during their initial start-up stage A program similar to CDIF, where private lenders provide start-up funds for small business An organization affiliated with the Small Business Administration where retired experts volunteer to provide free advice to small businesses that are just getting started A group of individuals or companies that invest in new businesses in exchange for partial ownership

An organization affiliated with the Small Business Administration where retired experts volunteer to provide free advice to small businesses that are just getting started Explanation An important source of information for small businesses is the Service Corps of Retired Executives (SCORE). Volunteers from industry, trade associations, and education counsel small businesses at no cost (except for expenses).

7. Why do incubator facilities continue to remain very popular with start-up businesses? Multiple Choice They are essentially loan offices that provide funding. They team up with large corporations who are willing to buy out the small businesses. They almost always provide strong visibility and walk-in customers. By providing essential services to entrepreneurs, they have a very strong success rate.

By providing essential services to entrepreneurs, they have a very strong success rate. Explanation According to a recent study conducted by the National Business Incubator Association (NBIA), 87 percent of incubator graduates remain in business..

17. Organizations known as ________ are often a source of funding for lower-income communities. These organizations have a significant role in the economic recovery and some start-up businesses have successfully found sources of capital by going through one of these organizations. Multiple Choice CDFIs (Community Development Financial Institutions) ARMs (Adjusted Rate Mortgage lenders) PACs (Personal Asset Collateral funds) venture capitalists

CDFIs (Community Development Financial Institutions) Explanation Community development financial institutions (CDFIs) may be a source of funding for businesses in lower-income communities. CDFIs played a big role in the economic recovery. CDFIs succeeded even after the credit bubble because they maintained the financial discipline other lenders lacked. They have the incentive to make sure their clients succeed because, if borrowers don't repay their loans, the CDFIs take the hit, not investors.

3. Leveling the playing field for home-based businesses, ___________ has (have) made starting a home-based business much more affordable. Multiple Choice broadband Internet connections and other technologies cultural acceptance tax laws opportunities to export to China and other global markets

broadband Internet connections and other technologies Explanation: Computer technology, including broadband Internet connection and smart phones, has leveled the playing field between big business and small business.

6. When Parker started his business, he knew he had to keep costs to a minimum and he worried about taxes. He planned to build and distribute safety goggles for construction workers and military personnel. He realized most of his business would not be through walk-in customers but rather large orders from companies. He chose to locate in a government-subsidized area called a(n) ________________, where he would receive tax breaks and other government support. Multiple Choice affective designation immigration zone enterprise zone intrapreneurial territory

enterprise zone Explanation Enterprise zones are specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support.

15. Although the business plan has a great amount of detail and requires thoroughness, a well-explained business idea will come to life almost immediately in which part of this document? Multiple Choice the financial plan the executive summary the marketing plan the explanation of the management team

the executive summary Explanation The well-conceived and well-explained executive summary will attract the attention of more readers than any other part of the business plan. It is a summary of the highlights of the document and strongly advocates the product's or service's competitive advantage.

14. A business plan for a new business does NOT need to include Multiple Choice any advantages relative to the competition. a discussion of the purpose of the business. a description of the company background. the names of the prospective lending companies.

the names of the prospective lending companies. Explanation A business plan is a detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s). Since potential owners are seeking funds, they will not yet have the name of potential lending institutions.

22. Small businesses have an advantage over large business in international trade in all these ways EXCEPT Multiple Choice they can begin shipping faster. their prices are usually lower due to low overhead. overseas buyers like dealing with individuals rather than large bureaucracies. they can provide a wide variety of services.

their prices are usually lower due to low overhead. Explanation Small businesses have a few advantages over big business in international trade like (1) overseas buyers like dealing with individuals, (2) small companies can usually ship faster, (3) small companies can provide a wide variety of suppliers, and (4) small companies can give personal service. Price is not included in this list.