MGT492 Exam 2

A DBA (doing business as) certificate is sometimes referred to as a(n)

"fictitious business name statement."

An entrepreneur should strive to effectively "pitch" the essence of his or her business in

15 seconds.

Which of the following is an advantage of a nonprofit corporation?

A nonprofit can apply for grants from government agencies and private foundations.

_____ refers to techniques for getting by on as few resources as possible and using other people's resources whenever feasible.

Bootstrapping

Which of the following is NOT a key rule for election of the S-corporation option?

Both active and passive S-corporation shareholders are subject to payroll tax.

The _____ is the most commonly chosen legal structure for a growing company that seeks outside capital in the form of equity or debt.

C-corporation

Which of the following gives employees the right to participate in the profits of a company at a specified percentage, even though they are not full shareholders with voting rights?

Capital appreciation rights

Which of the following is an important benefit of demonstrating proof of concept (POC) with a prototype?

Changes in the prototype can be made early in the process when changes are less costly.

Which of the following is the first step in the initial public offering (IPO) process?

Choosing an underwriter

Which of the following is NOT a core tenet of the design thinking approach?

Design thinking is about objective target markets or employees who perform functions.

_____ value refers to the amount that could be recovered by selling off all a company's assets.

Liquidation

Under the Internal Revenue Code, a limited liability company (LLC) exhibits all four characteristics of a corporation. Which of the following is NOT one of the four characteristics?

Tax-exempt status

Which of the following is NOT an advantage of a sole proprietorship?

The income from the business is taxed at a rate lower than the owner's personal income tax rate.

Which of the following is an advantage of a sole proprietorship?

The income from the business is taxed only once at the owner's personal income tax rate.

Bill is a lender and is considering a loan for Joann and her new business venture. Which of the following would NOT be one of Bill's concerns?

The number of strategic partners the venture has

Which of the following is the formula for the current ratio?

Total current assets/Total current liabilities

_____ is/are created when a business is adequately capitalized and has highly regarded investors; an experienced management team; customers; a unique technology, product, or service; the ability to continually innovate; and a rapidly expanding market.

Value

Which of the following is considered the weakest proof of concept (POC) approach?

Working prototype

Which of the following words or phrases should an entrepreneur avoid using in an executive summary?

a. Drinking the Kool-Aid b. Core competency c. Core values d. Scalable e. All of these are correct.

Title VII of the Civil Rights Act amended the original Civil Rights Act to include discrimination

against people with physical or mental disabilities.

Private investors, who are called _____, are part of the informal risk-capital market, the largest pool of risk capital in the United States.

angels

By creating a corporation and issuing stock, an entrepreneur gives up a measure of control to

board of directors.

To settle issues between the remaining partners in the event of the death of a partner, the partnership should have a _____ agreement in place.

buy-sell

The _____ plan is simply a way of recognizing that sometimes even the "best laid plans" don't work the way they were intended to work.

contingency

Many investors suggest structuring a(n) _____ deal for friends and family because this tactic avoids having to place a valuation on the company that is likely to be wrong.

convertible debt

The U.S. Supreme Court has defined the _____ "as an artificial being, invisible, intangible, and existing only in contemplation of the law."

corporation

The higher the _____, the more liquid the company is and the more easily its assets can be converted to cash to pay off short-term obligations.

current ratio

Software companies are a classic example of a(n) _____ organization.

distributed

A corporation that is created by filing a certificate of incorporation with the state in which the company will do business and by issuing stock is a(n) _____ corporation.

domestic

A _____ involves customer discovery and business model validation—testing your business model in the market with real customers to determine the conditions you must have in place to ensure a successful launch.

feasibility analysis

A study done by the Small Business Administration (SBA) Office of Advocacy in 2011 found that _____ firms changed their legal form in the first four years of their existence.

fewer than 1 in 10

In order to not incur the tremendous costs of purchasing equipment for a manufacturing plant, an entrepreneur may

form a strategic alliance.

The initial stock issued to the first shareholders of a corporation is sometimes referred to as _____ stock.

founder's

In a(n) _____, all partners assume unlimited personal liability and responsibility for management of the business.

general partnership

The _____ provides information about the projected profit or loss status of a business for a specified period of time.

income statement

Income derived from for-profit activities in a nonprofit corporation is subject to

income tax.

Returning to private status once a company has been a public company

is an almost insurmountable task

Once chosen to guide a corporation through the initial public offering (IPO) process, an underwriter draws up a _____, which outlines the terms and conditions of the agreement between the underwriter and the entrepreneur/selling stockholder.

letter of intent

In forming a(n) _____, the entrepreneur gives up proprietary interest in the corporation and dedicates all the assets and resources of the corporation to tax-exempt activities.

nonprofit corporation

When two or more people agree to share the assets, liabilities, and profits of a business, the legal structure is termed a

partnership.

In very simplistic terms, organizational culture is the _____ of an organization.

personality

Capital appreciation rights are also known as "_____ stock."

phantom

A(n) _____ is an offering document that describes an investment and its risks.

prospectus

All of the following are costs an entrepreneur may incur after acquiring capital EXCEPT

prospectus printing costs.

Often small businesses such as restaurants, boutiques, and consulting firms are run as

sole proprietorships.

Using a(n) _____ agreement is one way to make sure that only stock that has been earned will be distributed.

stock-vesting

The marketing plan includes all of the following EXCEPT

the location strategy for the business.

In addition to explaining the business model, an executive summary should include a well-thought-out summary financial plan with _____ to _____ years of projected revenues, expenses, cash flow, and headcount or personnel requirements at various milestones.

three; five

The time from idea generation through product development, market testing, and product launch is often referred to as the

valley of death.

When the value of a venture increases, but the value of its shares do not achieve a corresponding increase, this discrepancy is known as

valuation divergence