EEE 2023 Exam 2 Okstate
Jason and a group of investors want to start a new airline, but there are lots of government regulations, and it will be very expensive to accomplish. These disincentives for Jason's new company to enter the airline industry are called:
barrier to entry
If a new venture organizes as a corporation, it is legally required to have a(n) __________, which is a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm.
board of directors
Kevin Andersen is thinking about launching a small business consulting company. To get advice on how to proceed, he stopped by his local Small Business Administration (SBA) office. The SBA adviser told Kevin that he needed to write a 25 to 35 page narrative that describes what his new business does and how he will accomplish it. The SBA adviser is telling Kevin to write a(n):
business plan
Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's ________.
efficiency
Brain Sentry is starting a firm in the small industry that helps football teams discern whether a player has suffered a concussion. This industry is still so new that no standard operating procedures have been developed. The industry Brain Sentry is entering is an example of a(n) ________ industry.
emerging
A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n) ________.
ethical dilemma
Harry Samuelson spoke to an investor who is interested in his business idea. Harry offered to send the investor a copy of his full business plan, but the investor asked for a short overview of the business plan instead. What portion of his business plan should Harry send the investor?
executive summary
________ is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash.
factoring
Regarding an elevator pitch, if you really did find yourself riding an elevator with a wealthy individual (angel investor), and you had 60 seconds to pitch your business idea, what is your goal at the end of that elevator ride?
for the investor to ask you for more information about your company
A mind map is a tool:
for visually organizing information
A(n) ________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest.
founders' agreement
Jackie decides to hire someone to create some marketing materials that she can use for her business in print and online, but she doesn't want to hire a full-time employee and pay for benefits, workers' compensation, and FICA taxes. Jackie hires someone on a short-term basis who has their own computer and other equipment, and also does the same type of work for other companies. This person is called a(n):
freelancer
Partnerships are organized as either ________ or ________ partnerships.
general; limited
Which of the following is NOT one of the elements of a mind map?
images only, with no words
Which of the following answers correctly matches the financial statement with its description?
income statement - tells how much money a firm is making or losing
You plan to open a video arcade. You discover your potential customers might also spend time at a movie theater or bowling alley. Those businesses would be considered:
indirect competitors
When starting a new business, it's a good idea to examine the overall industry you'll be working in. Which of the following is/are characteristic(s) of attractive industries?
industry is not crowded
A business plan is important for two reasons: it forces the founding team to systematically think through every aspect of their new venture and:
it communicates the merits of a new venture to outsiders, such as investors and bankers
The fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and sellers, is referred to as the ________.
liability of newness
Generally, industries are more attractive when the threat of substitutes is:
low
Nathan is working on his business plan for his company that will rent and set up tents for special events like tailgating, wedding receptions, and car shows. His business professor recommends Nathan identify the different types of customers he may have based on their age, sex, income, education level, interests, and other characteristics. This process is known as:
market segmentation
According to the textbook, a business plan is best described as a(n):
narrative description of a new business
The process of building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to the firm is called:
networking
Jessica just took a job with Instagram. As part of her employment contract, Jessica signed an agreement that states that she will not reveal any of Instagram's trade secrets. The agreement that Jessica signed is called a(n) ________ agreement.
nondisclosure agreement
According to the textbook, the ________ is/are the heart of the financial section of a business plan.
pro forma financial statements
In order for an investor to take you seriously, you should make sure your business plan is:
realistic
Jacob and Ashley started a photography business three years ago. Now, Jacob is planning to get married and move out of state and step down from the business. How should Jacob and Ashley decide how Jacob should be paid for his share of the business?
refer to the buyback or buyout clause in their original founders' agreement
A(n) ________ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist.
skills profile
Which of the following is NOT an individual, group or institution that normally reads a company's business plan?
state and federal government officials
According to the textbook, how do well-managed firms respond to the Five Forces that determine industry profitability?
they try to position their firms in a way that avoids or diminishes the forces
All of the following are advantages of a sole proprietorship except ________.
unlimited liability
________ depict relationships between items on a firm's financial statements.
Financial ratios
________ costs are costs that a company incurs whether it sells something or not. ________ costs are the costs a company incurs as it generates sales.
Fixed; Variable
Which of the following statements is NOT true regarding the attributes of the founder(s) of a firm?
Founders with experience in the same industry as their new ventures will typically have "blinders" on and are typically not as effective as founders new to the industry.
Drew has started a remodeling/construction business. He has no employees and doesn't want to spend a lot of money on legal stuff so he tells you he will be a sole proprietorship. As a bright young business student, what is the main reason you recommend he not set up his business as a sole proprietorship?
He is subject to unlimited liability if something goes wrong
Which financial statement records all of a firm's revenues and expenses for a given period and shows whether the firm is making a profit or experiencing a loss?
Income statement
According to Porter's Five Forces, if I own a gym in a college town like Stillwater, OK, and the threat of substitutes includes the YMCA, a campus fitness center, lots of city walking trails, and other commercial gyms, what effect does that have on my pricing for my customers?
It tends to lower my prices so I can stay competitive
Which of the following is NOT one of the sections normally found in a business plan?
Market Analysis
________ is the process in which an impartial third party helps those involved in a dispute reach an agreement.
Mediation
________ are projections for future periods based on forecasts and are typically completed for two to three years into the future.
Pro forma financial statements
Which form of business ownership is the worst choice for an aggressive entrepreneurial firm?
Sole proprietorship
The price of prescription medicine is high, partly because when someone is sick there is no real alternative to buying medicine if they want to get better. Which of Porter's five forces explains how this aspect of the prescription medicine industry helps keep profitability high?
Threat of substitutes
Which of the following was not identified as one of the four main financial objectives of a firm?
Timeliness
Break-even is:
a calculation to determine when a business starts making a profit
Justin sells security systems to local businesses. After he installs the system, he sends the customer an invoice. Justin usually receives the money from the customer about 30 days later. Justin's accountant calls this money that is owed to him:
accounts receivable
Shelly recently launched a social network for chefs. One thing Shelly is thinking about is creating is a panel of experts who can provide her ongoing direction and advice on an informal basis regarding the future of her business. Shelly is thinking about creating a(n) ________.
advisory board
The Balance Sheet shows the relationship between a company's:
assets, liabilities, and equity
A disadvantage of C corporations is:
double taxation
C corporations generally issue two classes of stock known as _____________ and _______________.
common; preferred
Jenny sells flower arrangements in her flower shop. On average a bouquet sells for $65, but she has to pay for the flowers that go into the arrangement, the vase, and has to pay an hourly employee to put the arrangement together. So she spends about $18 on those costs. Those expenses are called:
cost of doing business
