ent exam 2: Chapters 7-12
Zeno had a great idea but no cash so he asked the bank for a loan to finance the entire operation. It seems he forgot that a bank would never provide _______ % of the firm's financing.
100
The debts that Rhonda's company will repay within the next ______________ are considered to be current debt.
12 months
Floyd's income statement showed for the current year his company had an operating income of $30,000 and his balance sheet showed total assets of $200,000. His return on assets is _________ percent.
15
Jaime is preparing his forecasts for the coming year. How many scenarios should he prepare when forecasting and budgeting?
2
Andrew is a venture capitalist who would like to find a good new business in which to invest. He's done this before so he has learned to limit his investing to firms with potentially high returns in a _____ period.
5-10 year
Allison plans to open a boutique, a trendy retail shop. She will rely heavily on walk-in customers to support her business. Allison will need:
A brick-and-mortar facility.
Vicki is a business angel who is looking for a start-up company in which to invest. Which company would she most likely invest in based on current research?
A business in an industry in which she has had experience
An important advantage an entrepreneur gains by leasing rather than buying a facility is
A decrease in investment risk.
Emma is looking for a building for her homestyle cooking restaurant.
A major consideration would be: The building should be on one level.
Reciprocation is
A sense of obligation to repay what has been done for you.
Garland uses the family room of his home for his business. The children share his computer for their homework and games. The family room also contains the TV and homework space for the children. The IRS is likely to disallow his deduction for this space because:
A separate space must be clearly set asaide for the sole use of the business.
Dylan has purchased stock in a new corporation. As proof of ownership, Dylan will receive:
A stock certificate.
Which group best defines a partnership?
A voluntary association of two persons to have a business for profit.
Annie is starting her photography business and is locating it in her family home. Which aspect is critical in the balance between her business and her family?
All of the above statements are true.
The strategic alliance between The Center for Systems Management and Technovative Marketing is an example of how
An alliance was formed due a third party bringing two companies together.
Upon the death of the majority stockholder in a corporation, direct control may pass to
An executor
A basic legal principle involving stockholders is that
An ownership interest in a corporation does not confer a legal right to manage the firm.
Upton was surprised to find his partner had signed an agreement to sell product to a customer at below cost. He tried to cancel the contract but found out that:
Any partner can legally bind the company without the consent of ant other partner.
Becky wants to organize her startup as a regular corporation. One of the first steps Becky should take is:
Apply for permission to incorporate in her state.
Basic considerations that enter into the selection of a location for a manufacturing business normally include
Availability of raw materials.
Daisy is planning a clothing manufacturing company. When selecting the location for her production facility, Daisy will want to consider:
Availability of suitable labor.
For many new firms, the most important reason to lease rather than buy a facility is
Avoidance of a large cash outlay.
The limited liability company form of organization
Avoids the double taxation of C corporations.
John created Acme Online to allow paper suppliers to compete for manufacturers' orders over the Internet in live auctions. This model would best be described as
B2B
Amazon.com represents the classic ____ firm.
B2C
The key to strong management in a new firm is
Balance, with each member having competence in at least one area.
A good reason for relocating a typical manufacturing business is to
Be closer to raw materials.
A corporate charter should
Be in accord with the state law.
A risk for a small firm creating a strategic alliance with a larger company is
Being squeezed financially.
The two dimensions of management control of a small corporation usually involves which individuals?
Both stockholders and corporate officers.
An example of special-purpose equipment for a carbonated beverage company is a
Bottling Machine that adjusts pressure for different flavors.
A corporate charter should be
Broad in the statement of the firm's power.
Facilities that rent shared space, services and management only to new businesses are called
Business Incubators.
If partners cannot resolve disputes between themselves they may be wise to hire a(n)
Business mediator.
In the B2B model, the customers are
Businesses
What legal form has the smallest percentage of new businesses?
C Corporations.
Which organizational form would be best if the new company owners intend to provide extensive fringe benefits for owners or employees that would not be treated as taxable income to employees?
C corporation.
Jason has neither a website nor a storefront. Instead, he lists his products for sale on a site that provides customers with the ability to list products for potential buyers. Jason is using a ______ site.
C2C
Businesses that operate in the home
Can increase profits by decreasing costs.
A listing of cash receipts and cash disbursements, usually for a relatively short time period
Cash budget
Bart is ready to look for a site for his new business. To help him in his search he should:
Check into site selection software.
Calvert is contemplating building an aluminum smelting plant. The ratio of bauxite, the raw material from which aluminum is extracted, to aluminum is two to one. It takes two tons of bauxite to produce one ton of usable aluminum. Where should Calvert locate his smelting plant?
Close to the bauxite mine.
Special consideration should be given to the selection of the ____________ and the logic of this selection should be explained in the marketing plan.
Company name
Allison is gathering information about other producers in her industry for inclusion in the ______________ section of her marketing plan.
Competition
As it relates to new businesses, one function of a social network is to:
Connect the enterprise to a social network that provides access to a wide range of resources.
The basis of eCRM is a
Consumer-centric data warehouse.
Ethical questions are being raised about the combination of the _________ and _________models on one website.
Content, transaction
Any person capable of ____ may legally become a business partner.
Contracting.
Frank would like to avoid personal financial loss if his business idea does not work. Which form of ownership would you suggest?
Corporation.
An advantage for choosing a hometown as a location for a new business venture include the fact that
Credit can be established more easily.
For small service or retail businesses, the top priority in location decisions is
Customer accessibility.
Site-related factors that should be taken into consideration when selecting a retail location include
Customer accessibility.
Which statement is true concerning business environment conditions for a new business?
Determining the zoning is important as it may limit a company's operations.
ShoeBiz produces shoes that until recently have been available only at the most exclusive stores. ShoeBiz decided to create its own website and sell directly to the consumer. This strategy is known as:
Disintermediation.
One benefit of an S Corporation is that it allows shareholders to receive dividends without
Double taxation.
Customer accessibility is the most critical factor in evaluating a specific site for a
Drugstore.
How does electronic commerce benefit small firms?
E-commerce allows small firms to expand beyong local markets without having to make a large investment.
Helen is planning to open a high-fashion clothing store for young professional women. Which descriptor is the most important consideration for the fixtures?
Elegant
Zeno, Zella, and Zorro wish to form a partnership. Zeno is putting up 60 % of the capital; Zella is putting up 40%, and Zorro is putting in no capital but will manage the business. In the absence of a provision in the partnership agreement, how will the liability and profits be distributed?
Equally
Evan has received permission from his state to form a corporation for his startup, expecting his liability would be limited to the amount of his investment. But his bank asked him to assume personal liability before it would grant him a business loan. Why would the bank make this demand?
Evan's business has no credit history.
Which source of information would be the most inclusive for an entrepreneur determining information to complete the financial statements?
Examine RMA Annual Statement Studies
As she considered becoming a partner in a new business venture, Valerie asked her potential partner about a(n) ___________ in the event that the partnership did not work out as expected.
Exit strategy.
Max chose to operate his production studio as a sole proprietorship even though his attorney cautioned that he was
Exposing himself to unlimited personal liability.
A chattel mortgage is a loan for which real property, such as land or a building, serves as collateral.
F
A company that has over 100 employees with locations in several states is typically the type of company in which business angels make an investment.
F
A firm with potential for large profits, as opposed to high growth potential, has many more possible sources of financing than does a firm that offers only unattractive returns.
F
A line of credit is a short-term loan used in a business to help with financing fixed assets.
F
A source of early-stage capital financing for a company is financing from commercial banks.
F
After pro forma statements are prepared, they should be checked against actual results every quarter so projections can be modified.
F
An entrepreneur should always project at least two scenarios for financial forecasting and budgeting: best case, worst case, and most likely case.
F
Approximately one-half of the financing for startups comes from personal savings.
F
Around 5 percent of the business plans reviewed by venture capitalists are funded.
F
Asset-based lending is a type of financing secured by assets such as equipment and inventory.
F
Assets such as the quality of a firm's employees are considered tangible in nature and thus have substantial value as collateral.
F
Because Liam's new restaurant had a high volume of sales, his inventory needs increased illustrating that a firm's asset needs are the primary force driving sales.
F
Bettina plans to draw an income from her new business but her personal living expenses are not needed in the financial plan unless these expenses are part of the capitalization of the business.
F
Cash flow can be projected in two ways: using the income statement to project cash flows or preparing a cash budget.
F
Commercial investors are sometimes called business angels.
F
Common stock can be sold to underwriters, but they do not guarantee the sale of securities.
F
Financial projections should be limited to the income statement to prevent information overload on lenders and investors.
F
For entrepreneurial ventures with the potential for becoming significant businesses, initial public offerings have been the fastest-growing source of financing over the past two decades.
F
For every firm, there is a "right" answer to the question of balancing debt and equity, and it is important that the small business owner find that balance.
F
Generally, as long as a firm's operating income return on its assets in greater than the cost of debt, the owners' return on equity investment will decrease as the firm uses more debt.
F
High-tech businesses (such as computer manufacturers) generally require fewer assets than service businesses. F
F
Lines of credit are legal obligations to provide capital.
F
Most startup investors limit their investing to firms that offer potentially high returns within a one to three year period.
F
Private placement is the selling of stock to select venture capitalists.
F
Pro forma financial statements are statements that have been prepared in the proper format by a CPA.
F
Profits reward an owner for investing in a company and constitute a minor source of financing for future growth.
F
Profits that are retained within the company rather than being distributed to the owners are referred to as retained income.
F
Qualified small businesses that cannot obtain business loans through normal lending channels can get loans directly from the SBA through its 7(a) Loan Guaranty Program.
F
Small Business Administration loans include guaranty loans and loans directly from the SBA.
F
State and local governments are becoming less involved in financing new businesses.
F
The age of a company has little impact on the types of financing available to it.
F
The amount of trade credit available to a new company is dependent on the supplier's confidence in the firm and not the type of business.
F
The basic factors that determine how a firm is financed are restricted to the firm's past economic performance, the nature of its assets, and the personal preferences of owner(s) with respect to the marketing mix.
F
The main advantage of using credit cards for financing is the relatively low interest rate compared to bank loans.
F
The percentage-of-sales technique is an effective method for a new company to estimate asset requirements because asset-to-liabilities ratios tend to be relatively constant within an industry.
F
The private sale of a firm's common stock is regulated by the Securities and Exchange Commission.
F
The term net working capital equals current assets less total liabilities and is a measure of a company's liquidity.
F
To be realistic, an entrepreneur should project profits only one year into the future.
F
Because the corporation is a legal entity, one of its responsibilities is to:
File annual tax returns.
Which statement is true about location decisions?
Franchisers assist entrepreneurs with location decisions.
Lothian has asked five of his friends to serve on the board of director of his new corporation. Why is this not a good idea?
Friends are unlikely to disagree with the owner on matters brought before the board.
Lauren, a partner in Jales & Jales Bonding Company, manages its day-to-day operations. She is considered to be a _____ partner.
General
In a limited partnership, which partner remains bound by all debts of the business?
General Partner.
Harry is starting a business where he restores homes built before 1900 and is purchasing used equipment, specifically lathes, planing mills, and drill presses. This equipment is would be an example of what type?
General purpose
For small businesses, the Internet tends to blur ____ boundaries.
Geographic
Millie has a sole proprietorship which is her only source of income What legal action should she take to prevent the business from being ruined if she became incapacitated?
Give someone who is competent power of attorney to continue the business.
Jeff's Website Design and Data Storage deals directly with corporate customers online and builds websites and data storage to specifications after an order is placed. By reducing the firm's storage and carrying costs, this example illustrates that B2B firms can create
Greater efficiency in their buying and selling.
Using special-purpose equipment in the manufacturing process can result in
Greater output per machine-hour of operation.
A typical common stockholder of a corporation
Has the right to receive declared dividends.
To be eligible to be an S corporation, a firm must
Have no nonresident alien stockholders.
Linda has assembled a list of potential directors for her board. Whom should she not include?
Her attorney.
Juanita is considering locating her a consulting business in her home. Which consideration is the greatest challenge?
Her business image may not be perceived as highly as a brick and mortar business.
Vicenzo is the sole owner and manager of a startup company. As the business grows, he finds it more difficult to fulfill the needs of all the management positions. Although he is the creative genius behind the company, he lacks experience in other areas. At this point, Vicenzo should:
Hire a management team with expertise in complementary areas.
Dallas is considering starting his business in his hometown, hoping that:
His friends and family will use his service and encourage others to follow suit.
To maintain status as a corporation, the corporation must:
Hold annual meetings of both the shareholders and the board of directors.
The income statement answers the question:
How profitable was the business?
Where should Rhonda put the administrative expenses for her business when she prepares the financial forecasts?
In the operating expenses section
Which action will be a concern for a prospective investor?
Inadequate provision for personal expenses of the entrepreneur
Reliable Construction created a website to post photos of some of their completed projects and display their address and phone number along with a list of the types of projects they can complete. Reliable has used the ___________ model.
Information-based
A variation of the content model is sometimes called the ____ model.
Information.
A key characteristic of a partnership is that each partner
Is capable of legally contracting.
A corporation
Is chartered under state laws.
Ownership in a corporation
Is more easily transferable than ownership in other forms of organization.
A corporation's board of directors
Is the governing body for corporate activity.
Collin's Classic for Children with Cancer is a 501(c)3 nonprofit corporation that sells shirts. The organization will be taxed as a ____________.
It is not taxed.
Jane and Randy have a partnership with their company of JR Enterprises. Which statements reflect how the partnership pays taxes?
JR Enterprises does not pay any taxes.
According to the National Federation of Independent Business, what is the main reason entrepreneurs buy equipment as opposed to leasing?
Less Expense
Ingrid has asked 110 of her closest friends to invest in her company, promising them protection from personal liability. Which form of ownership would you recommend Ingrid use?
Limited Liability company.
Harvey would like to support his friend's new business financially but also wants to protect his assets in case the business fails. Which form of ownership would you recommend?
Limited Partnership.
A short-term loaN
Line of credit
Sites such as eBay and Bidstart.com derive most of their revenues from:
Listing fees and commissions on sales.
Verlin wants to avoid a common mistake often made by new entrepreneurs. What advice would you give him?
Make sure he has adequate financing.
For a small firm, which step will increase chance for success of a strategic alliance?
Make sure the alliance is clearly a "win-win" opportunity.
Webster is reviewing resumes looking for candidates for leadership positions in his very young company. Webster is putting together his:
Management team.
A ____ is defined as a group of customers or potential customers who have purchasing power and unsatisfied needs.
Market
why would a small business conduct less marketing research than a larger, established firm
Marketing research is expensive.
Callista can locate her business in any state regardless of its weather because she sells:
Mattresses.
An advisory board, as compared to a board of directors,
May be perceived as less of a threat to an owner than a board.
The compensation paid to board members
May include a percentage of the profits.
Zoning ordinances
May limit wht type of business can be located on the property.
Startup owners may increase their chances for success by seeking _____ over a management team with family and friends.
Members with a balance of expertise.
Meredith is opening a high end shoe store specializing in designer shoes. Which approach is probably the wisest strategy for the marketing efforts of this company?
Multi-segment strategy since she could concentrate on persons wanting shoes for different reasons.
Current assets less current liabilities
Net working capital
For a corporate charter to be obtained,
One or more persons must apply to the secretary of state for permission to incorporate.
A strategic alliance is
Organizational relationship that links two separate business.
Which legal form allows owners to contribute no capital but still play a part in managing the business and share in its profits?
Partnership
The legal document that spells out the partners' rights and duties is called the
Partnership agreement.
Stockholders have limited liability unless they
Personally endorse company notes.
Ralph formed a corporation as a fund manager. He accepted money from his customers promising to invest it and build cash value for them. Instead he kept the money for himself to enjoy a lavish lifestyle. The court removed liability protection from his corporate entity because the incorporation had been used to perpetuate fraud. This is an example of:
Piercing the corporate veil.
The right to buy new shares of stock in proportion to stock already owned is called a
Pre-emptive right.
John, a car repair shop owner, is developing the warranty and repair policies for his business. What area of the marketing strategy is he addressing?
Product and/or Service plan
Large manufacturers have been known to form strategic alliances with small manufacturers in order to benefit from the smaller firms'
Product development efforts.
Abby, Adam, and Arnold are partners. They have planned to continue the partnership even after the death of any one partner. To this end, the partners have:
Purchased life insurance policies naming the other two partners as beneficiaries.
Robbie's financial advisor referred a customer to Robbie's new business. Under the concept of ___________, Robbie is now obligated to return the favor.
Reciprocation.
Trevor is in his early 60s but still wants to "strike out on his own" by starting a new business. One roadblock he may face is:
Resistance from creditors to lend money for the enterprise.
Jeanne, a Canadian citizen, would like to invest in Ingrid's startup. If Ingrid organizes her business as a(n) ________________________, Jeanne is prohibited from investing.
S Corporation
Barbara runs an Italian restaurant and is currently considering leasing or purchasing some updated equipment. What statement is correct?
Since the equipment she is buying will become outdated in two years, leasing would be a better option than purchasing.
Fletcher has pre-school children. He might choose to work from home:
So he can spend more time with his family.
Sam does not want to share the fruits of his labor with anyone. It is important to him that he have total control over his new business. Which form of ownership would you recommend for Sam?
Sole Propietorship.
Unlimited liability for business debts is imposed on
Sole propietors.
Emile has very little money with which to start his business so he wants to keep the cost or forming his company as low as possible. Which form of ownership would you recommend for Emile?
Sole proprietorship.
Which organizational type results in the business owner having unlimited liability?
Sole proprietorship.
Genevieve just completed law school and is ready to open her law office. The image her office should convey is:
Solid, trustworthy, confident with neutral colors and comfortable furniture.
Hannah makes delicious baked goods but has no retail space. She has contracted with a local grocer to sell her wares in the grocery store. This arrangement is known as a(n):
Strategic Alliance.
___________ and ____________ are questioning methods that involve contact with respondents.
Surveys, experimentation
A small business that needs to purchase real estate could apply for a 7(a) guaranty loan.
T
Borrowing money rather than issuing common stock typically increases the potential for higher rates of return to owners.
T
Both wholesalers and equipment manufacturers/suppliers can be used as sources of funds.
T
Companies that have business dealings with a new firm are possible sources of funds for financing inventory and equipment.
T
Debt financing as opposed to equity financing allows owners to retain voting control of the company.
T
Financial forecasts are required by lenders since they will want to know how they will be paid back; investors will use the forecasts to value the company.
T
Goodwill is considered a intangible asset.
T
If a company has a signed purchase order from a creditworthy customer and the gross profit margin on the order is anticipated to be 36 percent, purchase-order financing is likely.
T
If a firm finances with equity rather than with debt, it will bear no interest expense and thus yield greater net income.
T
Many small firms have a tendency to underestimate the amount of capital the business requires when beginning operations.
T
Marcia like to use other people's money when financing her business. In this way she "does more with less" by controlling resources without actually owning them.
T
Mario has high hopes for his new business, anticipating a very large profit margin. For the preparation of his forecasts, he should use industry averages regardless of his hopes.
T
One potential problem with acquiring funds from friends and relatives is that they might feel they have the right to interfere in the management of the business.
T
Small business owners sometimes accept higher levels of debt because doing so permits them to retain all of the stock and full ownership.
T
Spontaneous debt financing results when accounts payable increase in proportion to a firm's profits.
T
The cash budget is concerned only with dollars received and dollars paid out.
T
The conventional measure of liquidity is the current ratio, which compares the current assets to total liabilities on a relative basis.
T
The cost of goods sold can be either fixed or variable.
T
The five C's of credit are character, capacity, capital, conditions, and collateral.
T
The projection of profits, asset requirements, financing requirements and cash flows are essential in determining whether a venture is economically viable.
T
To project pro forma financial statements, speaking to others in the industry and researching industry averages are good starting points.
T
Use of debt financing increases potential returns when a company is performing well, but it also increases the possibility of lower--even negative--returns if the company does not attain its goals in a given year.
T
Venture capitalists restrict their investment in startup companies.
T
When a stock sale is restricted to private placement, an entrepreneur can avoid many of the demanding requirements of the securities laws.
T
A significant difference between a board of directors and an advisory board is:
The advisory board has no legal authority over the owner or the company.
Cameron is creating the document that specifies the size of the board, the duties of the directors, voting rights, etc. This document is known as:
The articles of incorporation.
E-commerce refers to
The buying and selling of product or services over the Internet.
Rod is locating his architecture business at his home in a suburban area. Which professional should he contact first before starting?
The city's planning and zoning board to make sure he can have a business in the home.
Which entity is liable for a corporation's debts?
The corporation itself.
Glenda, an employee of a corporation, caused a traffic accident while on company business. Who will pay for the damages?
The corporation.
Eaton is writing the location plan for his business plan. He should be sure to include his requirements for office equipment because:
The cost for this equipment needs to be included in his financial plan.
An owner in a professional corporation is shielded from
The liability of other owners.
Fiction County Sheltered Workshop is a 501(c)(3) corporation. Day Services, a C corporation operating in the same county, has offered to buy FCSW. If this transaction occurs, what happens to the money Day Services will pay for FCSW?
The money will go to another nonprofit corporation.
The major difference between the information-based model and the content-based model is:
The presence of ads in the content-based model.
Jill's business has current assets of $50,000 and current liabilities of $25,000. Which statement is true about the company's current ratio?
The ratio is 2 and is acceptable for most industries.
Why are gas stations frequently located at the interchanges of interstate highways?
The site provides easy access to both customers and transportation.
Melissa would like to reduce the number of phone calls she gets from customers who want to place orders. Which model would best work for Melissa?
The transaction-based model.
Larry Knave, MD, is an owner in a professional corporation. If Dr. Knave is sued for malpractice, what is the liability of the rest of the owners?
They are protected from liability for his actions.
Charmaine has never bought anything from an online seller. Many others feel the same way. A frequent reason for their reluctance is:
They are reluctant to purchase a product without first seeing it.
Among the advantages of hiring family for leadership positions in a new company is the fact that:
They will often work for less compensation than non-family candidates.
Hermione decided to create an Internet site to complement her bricks-and-mortar store:
To attract customers from outside her local area.
After working together for a few months, disputes began to arise between two of the young company's leaders. Their differences seemed to be irreconcilable. The owner's best action would be:
To let one or both of the individuals go.
Steve started a Web-based business offering a mechanism for buying and selling antiques. He has set up his company using the ____ model.
Transaction-based
An entrepreneur can best build social capital by
Using reciprocation.
Bettina has found a relatively inexpensive building that is a converted service station. Before she signs the lease, she should ask:
What happened to previous business at that location?
Arthur's business needs a physical building. Arthur's most important decision will be:
Where to locate.
Roger is analyzing regional differences in seeking a location for a new firm and is looking at states with favorable tax laws. Based on this information, he should look at which state?
Wyoming
Joann is buying an existing convenience store. When she considers which bank to use, her best choice would be:
a bank close to her store.
It is important for Heather to monitor her cash flow because:
a business can go bankrupt with negative cash flows even though the income statement shows a profit.
Joel recently opened a neighborhood grocery. He chats briefly with each customer, carefully bags or boxes their purchases, and offers to load them into the customers' cars. Joel has learned that:
a business provides a bundle of satisfaction to its customers, not just the product they have bought.
The cash flow statement measures cash flows on
a cash basis.
Eugenia's company bought a delivery truck to deliver merchandise to customers. This truck should appear as ___________ on the balance sheet.
a fixed asset
In considering its marketing strategy a new venture will typically concentrate on
a single-segment approach.
Sullivan just bought a new pickup truck with a snow plow. He contacted the National Weather Service to get information about snowfalls to help prepare his sales forecast. Sullivan is using:
a surrogate variable.
2. Which statement is true about starting a business online as a part-time entity?
a. Starting an Internet-based business on a part-time basis reduces the entrepreneur's personal risk if the company should fail.
5. When Cameron and Ashley allow a customer to buy on credit, which account increases?
accounts receivable
Irwin has applied for a loan from an asset-based lending company. As security he will offer:
accounts receivable and inventory.
Coronado cannot use the income statement as a measure of cash flows because it is calculated on a(n) _______ rather than a(n) _______ basis.
accrual; cash
Because he lacks strong forecasting skills, Stan should:
all of the above.
Renata has asked her family members to help her launch her new business. She must consider that:
along with their financial futures, she may be putting the relationships at risk.
Venture capital companies
are often limited partnerships that raise capital from other investors.
The greater a firm's sales, the greater need for financing because of greater _____ requirements.
asset
Entrepreneurs determine financial requirements based on ________.
assumptions
Andrew is considering two models of cars. The size, price, and options are identical. However, one model gets better gas mileage. This fact would be considered a(n):
augmented product.
For investment purposes, Wilma needs a snapshot of the firm's financial position at a specific point in time. She should look at the
balance sheet
Xavier wants to know how much his company owns and how much it owes. He should look at the:
balance sheet
Paul is a CPA (certified public accountant). He offers a variety of services depending on the needs of his customers. Some hire him to perform bookkeeping activities; others have him prepare their tax return. Pau's market is segmented based on:
benefit variables.
1. Which emerging model of e-commerce is used to generate significant amounts of advertising revenue?
blogging
Which source of data would be the least helpful for secondary data use?
blogs
Marcia uses other people's money whenever possible to finance her business. She prefers to minimize and control rather than maximize and own. This practice is known as:
bootstrapping.
When Ben left the corporate rat race to start his own pottery business, he used some of his retirement savings to finance the business. This practice is known as:
bootstrapping.
Shiloh has begun the sales forecasting procedure with a variable that has a very large scope and then systematically is working down to the sales forecast. Shiloh is using the:
breakdown process.
Ideas Unlimited is a consulting firm that provided retailers with information about regional sales trends. To estimate demand in the market for its services, the firm's marketing department identifies all buyers in each category of retailers and determines how much business is possible. The market demand estimate is based on the
buildup forecasting process.
Theodore has identified all the buyers in a market's submarkets and then totaled the estimated demand for all the submarkets. Theodore used the:
buildup process
Will has decided to invest $10,000 into his neighbor's new company. The money will be used in the early stages of development. Will is considered a
business angel.
A firm's marketing philosophy determines how strategic marketing activities are used to achieve
business goals.
A simple listing of expected cash inflows and outflows provides the entrepreneur with a(n)
cash budget.
No single planning document is more important in the life of a company than the
cash budget.
Lucille is preparing the _____, which shows all cash receipts and payments involved in operating the business and managing its financial activities.
cash flow statement
The cash flow activities on the cash flow statement are divided into these categories
cash from operations, buying or selling assets, and financing the business.
Granville owns a construction company and would like to purchase a mobile construction office. The bank would likely offer him a _____ mortgage.
chattel
If Joan is applying for a loan for a shelving system to improve her retail sales where the system will serve as collateral, what type of loan
chattel mortgage
Instead of borrowing money from suppliers to purchase equipment, an increasing number of small businesses are
choosing to lease the equipment.
The balance sheet and income statement are separate reports, but actually
complement each other.
LIBOR is _____ the prime rate.
considerably lower than
U.S. businesses have recently shifted their focus toward a ____ orientation.
consumer
Every day, associates of Sewell Motors, a Dallas-based auto retailer, strive to exceed the company's expectations of treating the customer as its number one priority. Every action, policy, and ultimate sale is conducted professionally, with consumers' needs in mind. Sewell Motors subscribes to the ____ marketing philosophy.
consumer-oriented
The ____ marketing philosophy is the preferred approach for all businesses.
consumer-oriented
The decision to produce flavored spring water ice cubes in response to requests from its customers reflects Norway Ice Company's ____ marketing philosophy.
consumer-oriented
Traditionally, marketing philosophies have been categorized as
consumer-oriented, production-oriented, and sales-oriented.
In recent years, the emphasis in U.S. businesses has been on
consumers.
Isaac is looking for a business angel. His best chance of finding one is through:
contact with business associates, accountants and lawyers.
Yvonne is planning a coffee shop. The cost of producing the coffee should be included in the ________ section of the pro forma financial statement.
cost of goods sold
Roland has already projected his company's sales. The next step in forecasting his company's income is to project:
cost of goods sold.
Small business marketing involves a number of activities, including
creating, developing, preparing, communicating, and delivering a bundle of satisfaction to a target market.
Which financing source has the greatest advantage of speed?
credit card
Alex wants to make sure he has enough liquid assets to pay his current bills. To do this, he should calculate his firm's:
current ratio.
The description of potential customers in a target market is commonly called a
customer profile.
The market analysis section of the marketing plan should include
customer profile.
Odessa is writing the marketing plan for her bed and breakfast. She has written that her market inlcudes everyone from infants to the elderly. This is incorrect because
customers must have purchasing power.
The risk of being the lower-cost producer of a good or
customers will abandon your business when someone else offers a lower price.
It's been George's "baby" from the beginning and he really doesn't want to be accountable to any outsider for the decisions he makes in his business. In George's case, he should seek initially to secure _____ financing.
debt
Kevin wants to open his own car repair shop. To do that he will need tools and other equipment. The two methods Kevin can use to pay for these items are:
debt and equity.
Glenda is trying to decide between the use of debt and the use of equity to finance her young business. She should remember that:
debt must be repaid even if the company does not make a profit.
One factor that influences the choice between debt and equity is the
degree of control the owners hope to retain.
Rhoda describes her typical customer as female between the ages of 22 and 35 with at least two years of college and a household income above $50,000 annually. Rhoda is using _________ to describe her customers.
demographic variables
D&R Products forecast a first year asset requirement of $143,500; therefore, the total debt requirement is
dependent on the owner's equity amount.
People like Ben who "bootstrap" company financing are
depending on their own initiative to obtain the capital necessary to start up and grow.
In the analysis of a market, the customer profile should include a
detailed discussion of major customer benefits provided by the product and/or service.
Miriam wants to make sure she does not run out of cash so she is preparing a monthly cash budget. The first step is:
determine the percentage of cash collections by month.
Sheena is using her last three years' sales to forecast next year's sales. Sheena is using the _________ method.
direct
Fixed assets include
equipment.
Adopting a consumer-oriented marketing philosophy is most consistent with
eventually achieving long-term market success.
In her marketing plan, Candace is describing the laws of a foreign country and comments about the exchange rate. It is likely Candace is considering ______________ as a method of distribution.
exportation
Harlan's customers have been a little slow in paying their invoices and he is short on cash to pay his quarterly taxes. Harlan should consider:
factoring.
Although not the primary source of financing for most small business startups, another source of early financing is:
family members.
Chuck, Marie and Tommy are a group of friends who have formed a LLC to raise capital for an investment in 20 franchises of Rigby's, a new sports bar concept. Tommy will be the general partner; Chuck and Marie will be limited partners. These three are:
formal venture capitalists.
If the firm's rate of return on its assets is _____ than the cost of borrowing, then the owners' rate of return on equity will _____ as the firm uses _____ debt.
greater, increase, more
Williams Alternative Power, Inc., a company developing solar panels, has done considerable research and limited production during its two year life. It is about ready for its IPO. At this stage of its life cycle, its ability to attract venture capital is:
greater.
D&R Products forecasts that it will require $10,000 for equipment and depreciation will be over 5 years. The $10,000 will be reflected in the balance sheet as _____.
gross fixed assets
Even though Miriam projected an annual positive cash flow, she may run out of cash if:
her sales are seasonal.
In his presentation to his banker when he applies for a business loan to purchase additional equipment, Alan should emphasize:
how he will be able to repay the principal of the loan.
The initial step in the marketing research process is to
identify informational needs.
Walter knows the result of the equation "Sales-Expenses = Profits" can be found on the:
income statement
For any business, both the _______ and ________ are needed to determine a firm's financial position.
income statement; balance sheet
David is trying to decide whether to add capital through investing more of his own money or through borrowing money from the bank. To help him decide, you remind him that as long as his firm's rate of return on its assets is greater than the cost of the debt, his rate of return on equity will _____ as the firm uses more debt.
increase
To increase her return on equity, Latitia could:
increase the amount of debt on her balance sheet.
Willar expects his new business to support him and his family. This means his asset and financing requirements will:
increase.
In groups of business angels,
individual angels make personal decisions about whether or not to invest.
Mark follows the cash budget like it was carved in stone. He has fallen prey to the one real danger in over-reliance on a cash budget:
inflexibility.
Business angels, as opposed to venture capitalists, provide
informal venture capital.
The type of financing Evangeline received from a business angel is known as:
informal venture capital.
Caution is advised when relying on blogs for secondary data because:
information in blogs may not be factually correct.
Williams Alternative Power, Inc. a company developing solar panels, is applying for a loan. The research the company has done for the manufacturing process would be a(n) _____ asset for the loan evaluation.
intangible
Brenda is creating the marketing plan for her bakery. Many of the recipes she will use were handed down through her family and she would like to keep them secret. These recipes will be considered:
intellectual property.
Many venture capitalists:
intend to cash out after five to seven years.
Marketing research should be viewed as a supplement to, not a replacement for _____.
intuitive judgement.
Cameron and Ashley bought $40 of "premium pink lemonade mix" and paper cups for their lemonade stand. These items are considered:
inventory.
The consumer-oriented approach to marketing
is the recommended philosophy for all types of businesses.
David has a company decorating houses for the holidays. He has secured a $25,000 line of credit from his bank. For which purpose is David more likely to use this credit line?
labor to install the decorations in November
Ben left the corporate rat race to start his own business that will allow him to earn a small income while providing plenty of time to pursue his love of pottery making. He does not expect either growth or high profits. Ben's prospects for attracting outside financing are:
limited.
A firm should finance its growth in such a way as to maintain adequate
liquidity.
Before accepting money from a business angel, the entrepreneur should:
make sure the business angel is accredited.
Anna's new business looks like it can grow quickly and become profitable in its first year. Anna will likely find _____ possible sources of financing than those with less potential for growth and profits.
many more
The most detailed and scrutinized section of a formal marketing plan is the
marketing strategy.
Marvin is preparing one of the annual financial statements and has asked you which of the following should be included in operating expenses. You tell him it is:
marketing-related expenses.
A line of credit is the _____ amount of credit a bank will provide a
maximum
A balloon payment
may be required by the bank at about midway in the loan term.
Bernard has just learned that on the balance sheet, the assets must equal the ___________ plus the _______________.
money borrowed from others, money invested by the owners
Jake has prepared pro forma financial statements for his landscaping business. At the minimum, how often should he check results and make modifications as needed?
monthly
Tony operates a computer retail business. Based on the industry, how often should sales projections be for the company in projecting sales?
monthly for Year 1; annual for Years 2 and 3
At minimum, the price of a product and/or service
must cover the cost of bringing it to market.
Elyse wants to calculate her return on equity but has forgotten the formula. You tell her that return on equity equals
net income divided by owners equity.
The _____ method is probably the oldest form of research in existence.
observational
Techniques used to collect primary data are often classified as ____ and ____ methods.
observational/questioning
A golf club should break down its annual cash budget into shorter time units because
of the seasonality of its sales.
Depreciation is added back on the cash flow statement in which activity section?
operating
To determine her company's profits before taxes, Marilyn will have to deduct the firm's interest expense from its ____ income.
operating
To calculate his company's _______________, Edgar will subtract operating expenses from gross profits.
operating income
The assets-to-sales relationship tends to be relatively constant within an industry, allowing for a(n) _____ technique to be utilized in projecting asset requirements.
percentage-of-sales
Willard may be able to forecast his asset needs using the ____________ technique.
percentage-of-sales
A method of forecasting asset requirements
percentage-of-sales technique
The items on the income statement are expressed in dollars but the corresponding margins are expressed as:
percentages.
In the beginning, some entrepreneurs use ____________ as a source of financing.
personal credit cards
Penelope is planning to launch her first business. She will most likely acquire her initial financing from:
personal savings.
Even though Evan's company is a corporation, the bank imposed a loan covenant that required Evan to:
personally guarantee the loan.
Miguel is deciding how to get his product to his customers. His options include a fixed location, a mobile location, working out of his home, and the Internet. Miguel is making the ___________ decision.
place
Mary, owner of Delany Salsas, is curious to know whether the new packaging for her line of salsas is being noticed by supermarket consumers. To collect information, she passively watches shopper reactions as they pass by the Delany Salsas display. Mary is collecting ____ data through ____ methods.
primary/observational
Statements that project a firm's financial performance and condition, including projected profits, assets and financing requirements, and cash flows
pro forma financial statements
Tomas would like to know whether his new business will be profitable, how much financing he will need, and whether he will have adequate cash flows. Tomas can get this information from:
pro forma financial statements.
A firm's marketing mix consists of ____ activities.
product, pricing, promotion, and distribution
Bennett left his job as production manager and launched his own company because he was sure his methods of making the same type product would be more profitable and efficient. Bennett is likely to employ the __________ marketing philosophy.
production-oriented
Creators Plus, a modest-size manufacturer of quality crafts, expends considerable resources to ensure that its products are created in the most efficient manner. According to the owner, distribution and promotion are secondary considerations to managing an expedient production process. Creators Plus subscribes to the ____ marketing philosophy.
production-oriented
XYZ Corporation faces little competition for its product and can barely keep up with demand. The marketing philosopy most likely in place at XYZ is the ____________ philosophy.
production-oriented
Koldpak has focused principally on the development of revolutionary new ways of containerizing fresh produce for grocery stores. The firm's marketing philosophy is
production-oriented.
The section of the marketing plan which describes the entrepreneur's approach to creating customer awareness of the product or service is the
promotion section.
The areas of marketing strategy that should be addressed within the marketing plan are
promotional, pricing, distribution, and product and/or service plans.
Ralph owns a lumber yard and has a $500,000 purchase order from a construction company. His cost of goods sold for this order is $300,000 Because his company needs working capital, the most logical loan for the lumberyard would be to use ________.
purchase order financing.
In order to be appropriately considered a market, a group of customers or potential customers must have
purchasing power.
Marta's job involves asking shoppers in the mall about their experience with specific products. She works from a list given to her by the products' producers. Marta is using the _________ method to gather ____________ data.
questioning, primary
The basic instrument used to guide the researcher and the respondent when surveys are taken is known as a:
questionnaire.
Miracle Fund LLC is a venture capitalist. In exchange for providing venture capital, Miracle Fund:
receives the right to own a percentage of the entrepreneur's business.
For the typical small firm, the primary source of equity capital for financing growth is
retained earnings.
A loan covenant is very likely to require
salary limitations.
A ____ estimates how much of a product and/or service will be purchased within a market over a defined period of time.
sales forecast
Richard is trying to figure out how many of his product his new business could reasonably expect to sell in its first year. Richard is working on the:
sales forecast.
Wilson is so confident of the benefits of his product, he is sure people will line up to buy it if only they knew about it. Wilson will most likely subscribe to the _______________ marketing philosophy.
sales-oriented
When Abigail buys salt, the core product and the actual product are:
seasoning for her food and the salt itself.
To determine credit card average purchases, managers of Component City Stereo and Appliances reviewed credit card sales receipts from the previous three months. Managers are conducting marketing research by collecting and analyzing
secondary data.
Maria is projecting sales for her company for the upcoming new year. To be financially effective, she
should develop realistic sales projections.
the name of a new business should be:
simple, memorable, and descriptive of the benefits.
People of all backgrounds, occupations, and income levels wear watches but Rolex focuses only on the high-income portion of the market. Rolex uses a(n) ____________ strategy.
single-segment
As her accounts payable and accrued expenses rose along with her firm's sales, Ariel noticed that ________ occurs.
spontaneous debt financing
Short-term debts, such as accounts payable, that automatically increase in proportion to a firm's sales
spontaneous debt financing
As Willard's business grows and prospers, his company's total assets requirements will equal ___________.
spontaneous debt financing plus bank loans plus owner's investment plus retained earnings
Using the number of births in a historical record to predict the number of driver licenses issued in subsequent years is an example of the use of a(n) ____ variable in forecasting.
surrogate
Carla is a loan analyst at the bank. When Cameron applied for a loan, Carla looked at his balance sheet for ________ assets to evaluate a possible loan for his company's financing.
tangible and intangible
Abby is wanting to obtain a loan for a large oven for her bakery. Since the oven will last approximately 8 years, the ideal loan would be a _____ loan.
term
The federal government primarily provides funds to small businesses through
the Small Business Administration.
To determine how well her business is doing, Darlene should monitor the return on her investment (equity) because it is a better measure of performance than
the absolute dollar amount of income.
Spira Footwear, Inc. produces running and walking shoes with a patented technology. Therefore the company's profile should concentrate the most on
the benefits to the customers.
At a minimum, the price of a product or service must cover:
the cost of bringing it to customers.
Irene, owner of a small retail shop, is evaluating her customer profile. Which item is the most critical for her for her customer profile?
the customer benefits to verify they are consistent with the customer needs
When considering a loan application, bankers will consider:
the five Cs of credit.
Maguire was considering selling stock as a source of funds but was concerned about:
the loss of voting control of the company.
In addition to the interest rate on his business loan, Paul should also give attention to:
the maturity date.
What determines whether the sales forecasting process is direct or indirect?
the nature of the predicting variable
Forecasting sales for a new venture will be the most difficult when
the owner is unfamiliar with quantitative analysis.
Entrepreneurs should base their market assessments, production schedules, inventory policies, and personnel decisions on
the sales forecast.
Morton sells salt; Domino sells sugar. The best strategy for either of these products would be:
the unsegmented strategy.
If a Eugenie finances her firm with equity rather than debt, her net income could potentially be greater because
there is no interest expense.
Small firms frequently run into problems when:
they fail to match a term loan's payment terms with the expected cash inflows from the equipment purchased with the loan.
Projecting financials may present a challenge because in a startup business,
things seldom goes as planned.
If he holds true to the average, Donald Trump likely invests approximately _____ of his investment in later-stage businesses.
three-fourths
Ned was just about ready to begin his market research when an unknown rival launched a similar product in the market. Ned's best course of action would be:
to wait and see how well the rival's product sells.
A source of short-term funds for many small companies with inventories is
trade credit.
Oliver figured if people were willing to pay for bottled water, they would also be willing to pay for bottled air. Oliver has forgotten that customers will buy only if they have:
unsatisfied needs.
Nardella has completed her market research but now feels overwhelmed by the large amount of data. It might be helpful to her to :
use a program like Excel to help her interpret the data.
Cameron has applied for a loan to expand his young business. When bankers look for evidence of whether he will be able to repay a loan, they usually base their assessment on
what Cameron's firm has done in the past.
Even with all his billions and influence, Donald Trump, as an equity investor, cannot demand more than
what is earned.
The price of an item should be :
what purchasers are willing to pay.
Ignazio has just opened his business. One of the first things he should learn is:
which numbers are most important for him to watch and to watch them like a hawk.
In preparing a sales forecast, it is desirable to have forecasts covering the "most likely", "best case" and "_____ case" scenarios
worst
