ENT-2113 Test 2

T or F: A limited liability corporation (LLC) is similar to a subchapter C corporation in that all of the information required is the same.

True

T or F: It is advisable for an entrepreneur to employ formal written contracts whenever there is an agreement with another party

True

An inventory record will include: (Check all that apply.)

- A description of the item - An item number - The quantity of the item - A unit and total cost

Which of the following are common forms of debt for a new business? (Check all that apply.)

- Credit cards - Loans - Supplier credit

Which of the following statements are true regarding equity investment? (Check all that apply.)

- Equity investment involves selling a percentage of the business to an outside party. - In the case of dissolution, each investor is entitled to the percentage of the break-up value equal to their investment percentage. - The founder must clearly outline what rights and expectations each investor has as the business grows.

Identify the typical advantages of having suppliers invest in a new business. (Check all that apply.)

- Suppliers do not aim to take the business over if it does particularly well. - Suppliers refrain from trying to run the business.

A sole proprietorship is very popular among individuals who

-are unsure about their business idea -have a very small business -have a business where the costs and risks are low

Which of the following are part of the hiring process?

-writing a job description -advertising for a job position

The government closely regulates children who work under the age of

16.

Title VII of the Civil Rights Act applies to firms with more than ____ employees.

25

One disadvantage of the Subchapter S Corporation is the limitation to the number of shareholders, which is currently set at a maximum of ____ shareholders.

75

Match the types of accounting systems used by businesses.

A cash-based accounting system - Only the smallest businesses use this system. An accrual-based accounting system - Subchapter C corporations, partnerships, or trusts use this system.

The ______ states that businesses with more than 50 employees must offer employees insurance.

Affordable Care Act

Which law requires that there be no discrimination in the hiring, management or dismissal of employees with disabilities?

Americans with Disabilities Act

Once the candidate pool has been created, the business owners should

reduce the number of candidates to be interviewed.

Which funding tool involves the leasing of equipment from manufactures or a third-party reseller?

Asset lease

Which form of equity investors refers to high-net-worth individuals that invest widely in businesses?

Business angels

Which of the following is a relatively new means of raising capital that may result in either an equity approach or an in-kind exchange for the firm?

Crowdfunding

Which of the following is NOT true with regard to managing the flow of data?

Data measurement methods must be complex.

In the event of a business failure, which of the following sources of funding must be paid back first?

Debt

______ is a major source of nonequity financing and can come from banks, credit cards, or suppliers.

Debt

The ______ requires that employers not discriminate in pay to men and women who do the same job.

Equal Pay Act

Which funding option traditionally involves selling a percentage of the business to an outside party?

Equity investment

The ______ established a minimum wage for workers.

Fair Labor Standards Act

T or F: A Subchapter C Corporation treats fringe benefits that are paid out as income for employees.

False

T or F: Issues surrounding succession are never a problem in a family run business.

False

T or F: Workers compensation insurance is considered a minor expense for a business.

False

True or False: Credit cards are a form of equity investment.

False

True or False: The founder should avoid personally lending to the new business because it is an unsecured investment.

False

What are special funds that are neither equity or debt funds that are designed to aid businesses in specific areas?

Grants

Subchapter S and Subchapter C Corporations take their names from subchapters in the _______ Code.

Internal Revenue

What method of inventory control seeks to minimize excess capital investment in inventory by having it present only shortly before it is used?

Just-in-time (JIT) inventory

In recent years the ______ has become one of the most popular forms of incorporation for new businesses.

LLC

________ are very inexpensive to form as this type of organization is formed by simply submitting the paperwork to a state government and having a charter issued prior to beginning operations.

Limited Liability Corporations

Which account should be used when there is an expense too small to write a check for or when a check is simply inappropriate?

Petty cash register

Which of the following incorporation formations are required to pay income tax which results in double taxation?

Subchapter C Corporations

______ credit is a form of nonequity funding for physical assets as well as the actual supplies purchased.

Supplier

Identify a disadvantage of asset leasing for a new business.

The new business may spend more money for the equipment over time than if it had bought the unit outright.

Why are banks often quite restrictive in their lending to start-up firms?

The risk is perceived to be too high.

Which of the following is NOT a source of nonequity to start a business? (Check all that apply.)

Venture capital

The ______ system of a firm is a powerful asset that should be used as a fine-grained tool to provide data about when and how inventory is needed.

accounting

A board of _____ is formed at the discretion of the founders and composed of individuals outside the business who advise the founders.

advisors

Entrepreneurs should remember to __________ when writing an advertisement for a new hire.

be concise and oriented toward the basic information needed

What type of insurance can be purchased to cover losses from employee to embezzlement?

bonding

_____ insures businesses from damages caused by workers in the performance of their jobs.

bonding

A ______ rewards employees based on their performance.

bonus

In new corporations, the shareholders and board of ______ are often the same individuals.

directors

A board of ______ is required of corporations, but a board of ____ is optional regardless of the legal form.

directors; advisors

A(n) ______ investment is funds received by a business in exchange for a percentage ownership of the business.

equity

If a firm needs to generate cash in the short run, accounts receivable can be sold at a discount via a technique known as ______.

factoring

A _____ is the amount that a business pays an employee per hour of work performed.

hourly wage

A _____ description describes the skills and capabilities that a candidate should have.

job

In the long run, the cost of capital for nonequity funding is generally ______ that of equity investment.

less than

Which type of insurance helps to protect the business against lawsuit judgements?

liability

Which of the following features of the LLC are similar to the features of the Subchapter S Corporation?

limited liability

A(n) ______ involves a contractual agreement whereby the business receives some amount of money that must be repaid over a specified period of time at a specified interest rate.

loan

Promoting a drug-free workplace may be made more difficult in states like Colorado or Washington where

marijuana laws and drug-free workplace programs may conflict.

_______ is one of the most expensive costs for any business and most desired benefits for employees.

medical care

It is important to record and balance the company account on at least a ______ basis.

monthly

What is the initial value at which the firms shares are offered

par value

General and limited are two broad categories of _______.

partnership

Because it is expensive to obtain and maintain, a _____ should only be obtained if it contributes to the sustainable competitive advantage of the organization.

patent

Entrepreneurs should ask applicants to submit their _____ and list of references by the deadline.

resume

A ______ is a set amount of compensation for a given time period.

salary

The three key issues involved with starting a business include the funding of the firm, the creation of an accounting system, and ______.

the flow of information in the new business

Negotiations are primarily an

art.

A ____ consist of individuals who have a fiduciary responsibility to the shareholders of an organization.

board of directors

A(n) ______ is like a master system for tracking the activity of the business.

chart of accounts

Business owners should

check as many of the candidate's references as possible.

A _____ is payment based on a percentage of sales.

commission

Banks will lend money for the establishment and maintenance of inventory by arranging a revolving line of ______.

credit

Which class of partner in a limited partnership is considered the manager of the firm and has unlimited liability for any debts for judgements against the firm?

general

Besides sole proprietorships, which of the following business formations require the business debt to flow directly to the owner?

general partnership

Similar to a sole proprietorship, which of the following business formations has the issue of unlimited liability by all the partners?

general partnership

A(n) ______ is simply money designed to help the new business begin operations with no expectation of repayment.

grant

______ resources is the quantity and quality of human effort directed toward producing goods and services.

human

Which of the following statements about Human Resources is not true?

human resources most important role is to meet basic legal requirements

Which of the following statements are true regarding the items in a contract?

it is not necessary to reveal any patents, trademarks or copyrights

_______ is an example of a hybrid compensation system where the employee is paid a small salary but earns a percentage of the profits at the end of the year.

profit sharing

An important goal when writing an job advertisement is to

provide potential applicants with important information so that they can evaluate their qualifications for the position

Which of the following large firms have been a leading source of venture capital in the United States? (Check all that apply.)

- Microsoft - Intel - Cisco

Which of the following are typically the targets of grants? (Check all that apply.)

- Particular industries - Economic areas - Disadvantages groups

Which of the following are key reports a business should generate? (Check all that apply.)

- Petty cash - Expense account - Payroll - Accounts payable

Which of the following are potential business angels? (Check all that apply.)

- Professionals such as doctors or lawyers - Entrepreneurs who have cashed out - Individuals with significant inheritance - High-income executives of large organizations

A key aspect of how the funding will be used is found in the information provided by the business, and that comes from: (Check all that apply.)

- The accounting system - The data flow management

When are credit cards a good method of managing cash flow? (Check all that apply.)

- When paid off each month - When used as a tracking system for individual expenses within the company. - When used on a short-term basis

Which of the following statements regarding the Affordable Care Act are correct?

-the federal and state governments have established exchanges that group individuals and small firms together to lower the cost of health care -there are tax incentives for small businesses -one of the biggest beneficiaries of the Act are entrepreneurs who are the only employee

Which of the following is true regarding a board of advisors?

-the group is formed a the discretion of the founder -the group advises the founder on key issues -the group is composed of individuals outside the business

An important feature of a Subchapter C Corporation is that there are no limits to _______.

the number of shareholders that an organization can obtain.

Business owners should provide the interviewee with a realistic preview of the job and company

to set appropriate expectations for the potential employee.

A poorly performing employee is said to have a _____ impact on the entrepreneurial firm.

triple

What type of lending involves the bank estimating the residual value of the equipment if the bank had to repossess the equipment and then lend the business a percentage of the difference between that number and the sale price?

Asset-based lending

Which of the following is not considered. benefit, but is mandated by law?

unemployment insurance

Employers who fire employees without a legitimate, well documented reason

are opening themselves up for a lawsuit.

Funding received by a business by soliciting a large number of very small investors usually via the Internet is called ______.

crowdfunding

The Fair Labor Standards Act

established a minimum wage workers.

Identify the similarities between general partnerships and sole proprietorships?

-expenses flow through to personal tax forms -profits or losses are reported as personal income

Preemployment testing is acceptable

if there is a direct link between the performance on the test and the skill set necessary for success on the job.

Which of the following describes the roles that Human Resources management plays in business?

inspiring employees managing employees hiring new employees

The effective application of _____ is one means to limit liability concerns of the new venture.

insurance

A chart of accounts is simply a listing of each type of activity and each type of asset within the company.

- Asset category (3) - Income category (1) - Expense category (2)

Which of the following statements regarding a bonus system are correct?

-they are not as well defined as profit sharing -they are similar to profit sharing -they are based on the employee's performance

Which of the following statements regarding worker's compensation laws are correct?

-this insurance is regulated by the state the employee works in -workers compensation is an insurance for employees -some states run their own insurance fund, while other states contract with private firms

Where does funding typically start for most new businesses?

The founder's personal resources

Which of the following is a typical disadvantage of having suppliers invest in a new business?

The suppliers' deal involves an exclusivity agreement.

Entrepreneurs should always ask candidates to fill out an ______ for employment.

application

Business owners who offer profit sharing

pay employees a small salary, but offer a percentage of the profits that company earns.

A hybrid compensation system

pays a salary along with a commission.

A ______ examines an employee's goals and the outcome of those goals over a particular given period.

performance review

Employers may ask a job candidate about their ________, but not their ________.

prior convictions; arrest record

A _____ patent is for a new process, machine, article of manufacture or composition of matter, or any new and useful improvement of those.

utility

A(n) ______ ______ fund is a fund that is usually organized as a limited partnership and is organized to make significant equity investments in high-growth new ventures.

venture capital

Which of the following are examples of common tests that employers give to potential employees?

work behavior personality calculation

Which of the following items should be included on the payroll record? (Check all that apply.)

- Taxes - Benefit deductions - Base pay and overtime pay rate - Number of hours worked

Which of the following are characteristics of credit cards as a form of nonequity investment? (Check all that apply.)

- They are generally tied to a much higher interest rate than that of a bank loan. - They typically have a set upper limit.

Which of the following allow a new-business venture to mitigate the double taxation cost?

-corporation can pay owners salaries or bonuses -corporation can pay health insurance and other benefits to the owner -corporation can retain funds for future expansion

Which of the following allow a new-business venture to migrate the double taxation cost?

-corporation can retain funds for future expansion -corporation can pay health insurance and other benefits to the owner -corporation can pay owners salaries or bonuses

A systematic employee review includes which of the following steps?

-defined objectives for the next year -plans for the future employee growth through experience and training -how employees perform related to their objectives

Which of the following statements regarding equity theory are correct?

-employees will accept that someone who has been with the company longer may earn more -employees need a clear understanding how their compensation compares to peers' -employees judge the fairness of their compensation based on another's in a similar situation

Which of the following statements about succession are true?

-parents often wait too long before creating a formal succession plan -a successor should be selected and the person should be prepared early -when the parent retires they should let the child run the business on their own

Which of the following statements regarding drug testing employees are correct??

-some states offer discounts on workers' compensation insurance for businesses that have a drug-free workplace program -business owners have a right to insist on drug testing -employees privacy rights can come into conflict with a drug-free workplace policy

T or F: An entrepreneur should keep continuous records of all advertisements that have been run whether a physical publication or on Internet, who responded, and the criteria for a job.

True

T or F: Recruiting companies do an extremely good job recruiting and placing people with companies that have unique skill requirements.

True

Besides banks, finance companies, and the founders, another source of nonequity loans comes from:

friends and family.

Equity theory states that employees judge

how well they are treated in the context of how well others are being treated

Which type of business formation has at least two individuals who are partners in a venture but only one person declares a full pass through of all income on his or her federal taxes and assumes unlimited liability?

limited liability partnership

Which of the following are compensation options that a small business owner may employ to pay employees?

salary hourly wage commission

Accepting ______ ______ can limit a firm's ability to shop around for a cheaper source.

supplier credit

The hiring process ends when

the candidate returns a signed original of the offer letter.

Besides banks, finance companies, and friends and family, another source of nonequity loans comes from:

the founders.

Which of the following are likely to affect a small business when an employee becomes a problem?

-the organization does not fully benefit from the unhappy employee -the problem may cause other employees to have problems -the owner loses time by dealing with the situation

Which of the following are typically recommended before seeking outside funding? (Check all that apply.)

- Determine the percentage of ownership reserved for investors. - Determine the percentage of ownership for each founder. - Determine a fair and valid estimation of the value of the firm.

Which of the following industries would be highly regulated by the government?

industries involving alcohol medical related industries military related businesses

The details of the ______ should be developed prior to the conversation with the candidate.

job offer

Which of the following are the benefits of factoring for a new business? (Check all that apply.)

- The business gets the money from the accounts receivable immediately. - The business does not have to spend time and effort trying to collect the accounts receivable.

Identify the issues a new business uses to determine the quality of accounts receivable. (Check all that apply.)

- The size of the transaction - The debtor's credit rating

Which type of business formation involves two or more individuals sharing unlimited liability in a business venture?

general partnership

Which type of insurance covers the building, fixtures and inventory in all of the buildings in which the business has a function?

property

Which of the following are true regarding the accounts payable? (Check all that apply.)

- A record of payment toward each invoice should be included. - All invoices received should be recorded. - The record should include date paid, amount paid, and check number or tracking number.

The _______ is charged with protecting the health of workers.

Occupational Safety and Health Administration

Any form of capital infusion that must be paid back with interest is called ______.

debt