****BA109 Module 6 Exam (Chapters 1-5)****
The relationship between core competencies and competitive advantage is best described by which statement?
A company's core competencies become the nucleus of its competitive advantage.
Which of the following is required to form a partnership?
A general partner
The loan proposal section of a business plan should include all but which of the following?
A general request for funds without stating a specific dollar amount
Porter's five forces model only considers direct competitors within a single industry.
False
T/F Entrepreneurs are not willing to give up a steady paycheck.
False
T/F Minority-owned businesses now account for approximately 22 percent of all businesses in the U.S.
False
TEST
Limited liability
A special type of limited partnership in which all partners who, in many states must be considered to be professionals, are limited partners.
Limited liability partnership (LLP)
Which of the following was not identified as a way for the typical small business to establish a competitive advantage?
Lowering prices
Defining the company's target market, its characteristics, and its potential is part of which element of the business plan?
Marketing strategy
Creativity and innovation are the signature of large, entrepreneurial businesses.
T
The left brain processes information in a step-by-step fashion.
True
One form of primary research is:
a focus group.
A cost-leadership strategy:
works best when buyers' primary purchase criterion is price.
More than ________ percent of those holding patents win their infringement suits
60
More than ________ percent of those holding patents win their infringement suits.
60
David Birch, president of the research firm Cognetics, suggests that three percent of small businesses create approximately ________ percent of new jobs.
70
Of the 28 million businesses in the United States, more than ________ are considered small.
99 percent
Which of the following is an effective method of collecting information about competitors?
All of these
Which of the following is true regarding the corporate form of ownership?
All of these
Which of the following is true regarding the process of building a business plan?
All of these
Which of the following is/are true regarding business plans?
All of these
Which of the following issues would a typical partnership agreement address?
All of these
Which of the following issues would influence an entrepreneur's choice of a form of business ownership?
All of these
Which of the following questions should you consider before entering a lawsuit to protect intellectual property?
All of these
Which of the following statement(s) is/are true?
All of these
The executive summary section of the business plan:
All of these -should be a concise summary of the business venture. -should be no more than two pages long. -must capture the reader's attention and entice her to read the rest of the plan.
Cost-leadership may have which of the following inherent dangers?
An overemphasis on costs to the elimination of other strategies
It is unwise for entrepreneurs to monitor competitors' strategies and actions because such activities require them to engage in illegal or unethical behavior.
False
Large companies have a natural advantage over small firms when it comes to preparing a strategic plan.
False
Most loans banks make to startup businesses are secured not by collateral but by the character of the entrepreneur.
False
Objectives should be as general as possible to permit flexibility in the business.
False
Potential lenders and investors expect entrepreneurs to exaggerate the truth in their business plans, so telling the truth in the plan is really not important.
False
Primary research is information that has already been complied and is available for use, often at very reasonable costs or sometimes at no cost to the entrepreneur.
False
Setting seemingly impossible objectives, those outside of the likely reach of employees, helps managers to create and maintain a high motivation level.
False
Significant competitors are those that offer the same products and services your company offers, and customers often compare prices, features, and deals from these competitors as they shop.
False
Spelling and grammatical errors in a business plan don't really matter; potential lenders and investors look past them at the content of the plan.
False
Stockholders in the corporation have the same kind of liability as do general partners in a partnership.
False
T/F "Double taxation" refers to the fact that corporations are required to pay both federal and state income taxes.
False
T/F A service mark offers a different kind of protection but distinguishes the source of a product rather than a service.
False
T/F About 75 percent of the businesses in the U.S. can be considered "small" businesses.
False
T/F After presenting the business plan to a group of potential lenders and investors, an entrepreneur should sit back and wait to hear from those who might be interested in the venture.
False
T/F An entrepreneur should prepare a single set of "most likely" financial forecasts for one year into the future as part of the business plan.
False
T/F Because of their size and limited resources, small businesses rarely create innovations that are important to the U.S. economy.
False
T/F Company founders can become minority stockholders in a corporation but can never lose their final authority or control over business decisions because they are the founders.
False
T/F Current competitive conditions favor large companies over smaller ones because of their flexibility combined with their ability to use their size to achieve efficiency and economies of scale.
False
T/F Entrepreneurs must embrace traditional assumptions and perspectives about how things ought to be because they support creativity.
False
T/F Increased entrepreneurial activity is a phenomenon unique to the U.S.
False
T/F Large companies create significantly more patents and other forms of innovations per research and development dollars spent than small firms.
False
T/F Most entrepreneurs have invested the time to develop a sound business plan.
False
T/F Most family businesses survive to the fourth generation.
False
T/F One advantage of being your own boss and owning a small business is that work hours are very flexible and leisure time is abundant.
False
T/F Research has isolated a set of characteristics that can predict who will succeed as an entrepreneur.
False
T/F Research shows that not everyone can be creative.
False
T/F State law requires that individuals creating a partnership file the Articles of Partnership with the secretary of state.
False
T/F Stockholders in the corporation have the same kind of liability as do general partners in a partnership.
False
T/F The "C" of the 5 C's of Credit that is synonymous with cash flow is capital.
False
T/F The competitive test that a business plan must pass in order to attract financing for lenders and investors involves proving to them that the venture offers a high probability of repayment or an attractive rate of return.
False
T/F The executive summary serves as the thesis statement for the entire business plan.
False
T/F The left brain processes information intuitively-all at once, relying heavily on images.
False
T/F The opportunity to reap impressive profits is the primary motivation for most entrepreneurs
False
T/F The right brain is guided by linear, vertical thinking.
False
T/F There is concern over the future of entrepreneurship because so few high school and college students want to start their own companies.
False
The "C" of the 5 C's of Credit that is synonymous with cash flow is capital.
False
The U.S. Copyright Office does not require registering the creative work because registering it does not give creators greater protection over their work.
False
The best way to build a cost-leadership competitive advantage is to focus entirely on manufacturing costs.
False
The competitive test that a business plan must pass in order to attract financing for lenders and investors involves proving to them that the venture offers a high probability of repayment or an attractive rate of return.
False
The ideal strategic planning procedure for a small company should be formal and highly structured.
False
The most common form of business ownership in the United States is the partnership.
False
The most common reason banks give for rejecting small business loan applications is the entrepreneur's poor credit history.
False
The most effective business plans follow the "cookie cutter approach," following the standard format most preferred by lenders and investors.
False
The most effective way for a small business to establish a competitive advantage is by offering lower prices.
False
The opportunity to reap impressive profits is the primary motivation for most entrepreneurs.
False
The primary purpose of building a business plan is to raise capital.
False
The right brain processes information in a step-by-step fashion.
False
The sole proprietorship is the best form of ownership for entrepreneurs launching their first businesses.
False
The sole proprietorship is the easiest form of ownership to create, but once formed, it is subject to the greatest number of regulations.
False
The wise entrepreneur will indicate that there is no real competition for his new business venture, thereby increasing the likelihood that he will gain more interested investors.
False
Weaknesses are negative external forces that inhibit the firm's ability to achieve its mission, goals, and objectives.
False
When filing the corporate charter, a corporation must file in the state in which its headquarters are located.
False
Entrepreneurs need to rely on left-brain thinking to generate innovative product, service, or business ideas and use right-brain thinking to judge the market potential of the ideas they generate.
False ?
The creative process involves seven distinct steps including preparation, investigation, transformation, incubation, illumination, verification, and implementation.
False ?
Successful entrepreneurship requires left-brain thinking.
False?
Small companies that have expanded successfully into foreign markets tend to rely on all but which of the following strategies?
Focus on many countries initially.
Which of the following is a danger in choosing a differentiation strategy?
Focusing only on physical characteristics of a product or service and ignoring important psychological factors, such as status, prestige, image, and customer service
Which of the following is not a characteristic of a well-written objective?
General
________ are broad, long-range statements of what a company plans to achieve in the future that guide its overall direction and addresses the question, "Why am I in business?"
Goals
In terms of quality, which company has the weakest competitive position?
Impossible to tell from the information given
Which stage of the creative process requires one to develop a solid understanding of the problem or decision?
Investigation
Which stage of the creative process includes on-the-job training?
Preparation
Which key success factor does the entrepreneur who built this table believe is most important?
Quality
________ lateral thinking is somewhat unconventional and unstructured.
Right-brained
Before presenting a business plan to potential lenders and investors, an entrepreneur must be well informed and well prepared.
True
Capital requirements, estimate earnings, and return on investment are three aspects of the financial feasibility analysis.
True
Choosing S corporation status is usually beneficial to startup companies anticipating net losses and to highly profitable firms with substantial dividends to pay out to shareholders.
True
Conducting a SWOT analysis for her own business and for her key competitors allows an entrepreneur to gain a competitive edge by matching her company's strengths against her competitors' weaknesses.
True
Research shows that each hemisphere of the human brain processes information differently and that one side of the brain tends to be dominant over the other.
True
Small companies' core competencies are often the result of benefits such as agility, speed, closeness to customers, superior service, and innovative ability-all of which are size advantages that allow them to do things that their larger competitors cannot.
True
Some forms of ownership are much more costly and involved to create.
True
Strengths are positive internal factors that contribute towards accomplishing the company's mission, goals, and objectives.
True
Successful entrepreneurs come up with ideas and then find ways to make them work to solve a problem or fill a need.
True
T/F A corporation formed and chartered in Kansas is considered a domestic corporation when doing business in Kansas, and a foreign corporation when doing business in Missouri.
True
T/F A professional corporation is created in the same way as a regular corporation, and exists to provide the advantages of corporate ownership, including limited liability, to professionals such as doctors and lawyers.
True
T/F About 20 percent of downsized corporate managers have become entrepreneurs.
True
T/F An S corporation can issue both voting and nonvoting common stock to its shareholders.
True
T/F Because the entrepreneur is the driving force behind a business idea, he or she should also be the driving force behind the business plan.
True
T/F Before presenting a business plan to potential lenders and investors, an entrepreneur must be well informed and well prepared.
True
T/F Capital requirements, estimate earnings, and return on investment are three aspects of the financial feasibility analysis.
True
T/F Changing from one form of ownership to another once a business is up and running can be difficult, expensive, and complicated.
True
T/F Choosing S corporation status is usually beneficial to startup companies anticipating net losses and to highly profitable firms with substantial dividends to pay out to shareholders.
True
T/F Corporate downsizing has spawned a generation of entrepreneurs known as "corporate castoffs."
True
T/F David Birch considers "gazelles" those businesses that grow at 20 percent or more per year and gross at least $100,000 in annual sales.
True
T/F Diversity may be considered a characteristic of entrepreneurs, as they don't fit any statistical norm.
True
T/F Failure is an important part of the creative process, as it provides a chance to learn how to succeed.
True
T/F Family-owned and managed businesses account for 78 percent of all new jobs.
True
T/F If a partnership agreement does not exist, the partnership will be governed by the Uniform Partnership Act.
True
T/F In a business plan, both company goals and objectives should relate to the company's mission.
True
T/F In a professional corporation, all shares of stock must be owned and held by individuals licensed in the profession of the corporation.
True
T/F Increasing numbers of women are discovering that the best way to break the "glass ceiling" that prevents them from rising to the top of many organizations is to start their own companies.
True
T/F Liquidating an S corporation involves several steps, including paying all taxes and debts, obtaining the written approval of shareholders to dissolve the company, filing a statement of intent to dissolve with the secretary of state's office and, finally, distributing all remaining assets of the corporation to shareholders.
True
T/F Minority-owned businesses have come a long way in the past decade, and their success rate is climbing.
True
T/F Ninety-percent of businesses in the United States are family-owned and managed and account for 62 percent of total U.S. employment.
True
T/F One disadvantage of an S corporation is that the cost of many benefits-insurance, meals, lodging, and others-that are paid to shareholders with 2 percent or more of stock-cannot be deducted as business expenses for tax purposes and are considered taxable income.
True
T/F One study conducted by the Global Entrepreneurship Monitor (GEM) reports that nearly one in eight people in the United states is working to start a business..
True
T/F Serial entrepreneurs repeatedly start businesses and grow them to a sustainable size before striking out again.
True
T/F Small businesses actually create more jobs than the number of jobs big businesses create.
True
T/F Small companies have created at least two-thirds of the net new jobs in the U.S. economy.
True
T/F Starting a part-time business is a popular gateway to entrepreneurship.
True
T/F Successful "copreneurs" create a division of labor based on expertise.
True
T/F Successful entrepreneurs push technological and economic boundaries forward in creative ways and sometimes make unconventional decisions.
True
T/F Surveys show that small business owners believe that, as entrepreneurs, they work harder, earn more money, and are happier than if they worked for a large company.
True
The rapidly accelerating rate of change has created an environment in which staying in a leadership position requires constant creativity, innovation, and entrepreneurship.
True
The real value in preparing a business plan is not so much in the plan itself as it is in the process the entrepreneur goes through to create the plan.
True
Which of the following is not an enhancement to individual creativity?
Working without breaks until the project is complete or the problem is solved
Which company has the strongest competitive position?
Your company
Which of the following statements is true?
Your company's most vulnerable point against these two competitors is in the area of on-time delivery.
The ________ highlights significant financial and operational events in the company's life and should concentrate on the company's accomplishments.
company history
The aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market, superior to its competition, is its:
competitive advantage.
A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as:
double taxation.
Rather than attempting to serve the total market, the small firm pursuing a ________ strategy specializes in serving a specific target segment.
focus
In order for the control process to work, the business owner must:
identify and track key performance indicators.
The ability to apply creative solutions to problems and opportunities to enhance or to enrich people's lives is called:
innovation.
Strengths and weaknesses are ________ to the organization.
internal factors
A limited liability company:
is similar to an S corporation in that it is a cross between a partnership and a corporation.
Probably the most important reason to have a partnership agreement is that:
it resolves potential sources of conflict that, if not addressed in advance, could later result in partnership battles and dissolution of an otherwise successful business.
The focal point of any company's strategy, whatever it may be, should be:
its customers.
The right brain is guided by:
kaleidoscopic, lateral thinking.
When developing a company's mission statement, an entrepreneur should remember to:
keep it short and simple.
Every business is characterized by a set of controllable variables that determines the relative success (or lack of it) of market participants called:
key success factors
A ________ partner is a person who makes financial investments in a partnership, does not take an active role in managing the business, and whose liability for the partnerships' debts is limited to the amount they have invested.
limited
A special type of partnership in which all partners, who in many states must be professionals, are limited partners is called:
limited liability partnership.
All of the following are enhancements to individual creativity except:
limiting your reading sources.
In addition to the opportunity to create their own destiny and enjoy what they do, entrepreneurs also benefit from the ability to:
make a difference in an area important to them and be recognized for those efforts.
An explanation of how the product will be distributed is contained within the ________ section of the business plan.
marketing strategy
Small companies that operate globally from their inception are referred to as:
micromultinationals.
The ________ serves as the "thesis statement" for the entire business plan and is the broadest expression of a company's purpose and defines the direction in which it will move.
mission statement
The majority of new business owners work:
more than 40 hours per week.
Entrepreneurs who start businesses because they cannot find work any other way are:
necessity entrepreneurs.
A ________ is a road map of the tactics and actions an entrepreneur draws up to fulfill the company's mission, goals, and objectives.
strategy
Products or services that may be sought as alternative solutions-such as purchasing tax planning software rather than paying a CPA to assist with preparing your taxes-are referred to as:
substitute products.
The key to entrepreneurial success over time is to build a ________ competitive advantage.
sustainable
Right-brained individuals tend to challenge tradition, custom, and routine.
t?
After presenting her business plan to a group of potential lenders and investors, an entrepreneur should:
take a proactive approach by following up with every potential lender and investor to whom she makes a presentation.
"Double taxation" refers to the fact that corporations are required to pay both federal and state income taxes.
False
According to the U.S. Small Business Administration, a common delineation of a small business is one that employs fewer than:
100 people.
Approximately ________ percent of corporate managers who are "cast off" as companies downsize become entrepreneurs.
20
Ideally, a business plan should range from ________ pages in length.
20 to 40
It is estimated that ________ percent of new businesses fail within two years, while ________ percent fail within five years.
31; 51
Within five years, ________ percent of new businesses will fail.
51
Which of the following was not identified as one of the suggestions for small business success?
Develop a business plan as you grow your business.
Which of the following generally is not required by a Certificate of Incorporation?
A statement of how stock proceeds will be used
A differentiation strategy:
All of the above
A small company's mission statement:
All of the above
Hiring a diverse workforce:
All of the above
Small companies must develop strategies that exploit all of the competitive advantages of their size by:
All of the above
A business plan is a written summary of:
All of these
A business plan:
All of these
A clearly defined vision helps a company in which of the following ways?
All of these
A cost-leadership strategy works well when:
All of these
A solid business plan:
All of these
A strategic plan serves as a blueprint to help a company to:
All of these
A strategy should:
All of these
Before putting their money into a business idea, potential lenders and investors:
All of these
Entrepreneurs can increase their chances for success if they:
All of these
Factors that feed the economic boom behind entrepreneurship include:
All of these
The company history section of the business plan typically includes:
All of these
The nation's small businesses:
All of these
The profile of an entrepreneur includes:
All of these
Which of the following statements concerning small businesses and international markets is false?
Because exporting is so complex and requires a company to have so many international experts on staff, exporting is not feasible for small businesses.
In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership
False
Which of the following is not one of the three components of intellectual capital?
Competitor
Which company has the worst location?
Competitor 1
Which of the following is NOT one of the four important perspectives a balanced scorecard should look at a business from?
Competitor perspective
________ thinking is the ability to see similarities and ________ thinking is the ability to see differences among various data and events.
Convergent; divergent
________ are a unique set of capabilities that a company develops in key operational areas-such as service, innovation, and others-that allow it to potentially vault past its competitors.
Core competencies
________ is an entrepreneur's best insurance against launching a business destined to fail or mismanaging a potentially successful company.
Creating a solid business plan
During the incubation phase of the creative process, the entrepreneur might do all of the following EXCEPT which one to let ideas "marinate" in his mind?
Don't allow one's self to daydream.
Which of the following is a disadvantage of the corporation form of ownership?
Double taxation on profits
In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership.
False
In a sole proprietorship, the owner has limited liability.
False
Rapid prototyping, transforming an idea into an actual model, typically does not lead to improvements in design.
F
The right brain processes information in a step-by-step fashion.
F
"Big box retailers" present an opportunity for many small business owners.
False
"Convergent thinking" is the ability to see the differences among data and events.
False
"Divergent thinking" is the ability to see similarities and connections among various data and events.
False
"Improving the company's cash flow" is a good example of an effective objective.
False
A balanced scorecard looks at a business from four important perspectives: competitor, internal, innovation and learning, and financial.
False
A benefit is a descriptive fact about a product or service; a feature is what the customer gains from that product or service benefit.
False
A business with more than five owners must be a corporation.
False
A company's mission statement should be lengthy and use fancy jargon to impress outsiders.
False
A company's strategy spells out the ends the business wants to achieve, and its mission, goals, and objectives define the means for reaching them.
False
A corporation formed in Taiwan doing business in the United States is a foreign corporation.
False
A general partner is personally liable only for the amount of money he has invested in the partnership.
False
A limited liability company must have at least two owners.
False
A patent gives the inventor the exclusive right to make, use, or sell an invention for 50 years.
False
Although developing a strategic plan is important for large companies, it is not essential to managing a small company successfully because of its limited resources.
False
An entrepreneur should prepare a single set of "most likely" financial forecasts for one year into the future as part of the business plan.
False
As in a limited partnership, owners of a limited liability company who want to maintain their limited liability status cannot actively participate in the management of the company.
False
Because gathering information on competitors' products or services, strategies, and market share is so difficult, most lenders and investors see the competitor analysis section of the business plan as optional.
False
Company founders can become minority stockholders in a corporation but can never lose their final authority or control over business decisions because they are the founders.
False
Corporations must obtain a federal charter before they can conduct any business.
False
Defining the duties, responsibilities, contributions, and roles of the partners in a partnership agreement is not necessary since the law covers these provisions automatically.
False
Entrepreneurs must embrace traditional assumptions and perspectives about how things ought to be because they support creativity.
False
Entrepreneurs should artificially inflate the amount of a loan request and expect the loan officer to "talk them down."
False
Entrepreneurs should not spend much time selecting a form of ownership for their businesses because making the choice is merely a technicality, which has little impact on the business and its owner(s).
False
Identifying a specific target market is not an essential part of creating a solid business plan for a small company.
False
If a sole proprietorship fails, the owner is not liable for its debts since the business is a separate legal entity.
False
Which of the following is not an advantage of the corporate form of ownership?
It is the easiest and least expensive form of ownership to create.
Which of the following is NOT a characteristic of the strategic management procedure for a small company?
It should begin with an extensive objective-setting session.
Which hemisphere of the brain is responsible for language, logic, and symbols?
Left hemisphere
Which hemisphere of the brain processes information in a step-by-step fashion?
Left hemisphere?
Which of the following statements is not true regarding the diversity of entrepreneurs?
Minority-owned businesses now account for approximately 22 percent of all businesses in the U.S.
________ spell(s) out the "ends" an organization is to achieve; ________ define(s) the "means" for achieving the ends.
Mission, goals, and objectives; strategy
________ are short-term, specific targets which are attainable, measurable, and controllable.
Objectives
Which of the following is not a recommended method of collecting competitive intelligence?
Pay competitors' employees to become informants about their companies' strategies, markets, and trade secrets.
The form of ownership under which a company is organized appears in which section of the business plan?
Plan of operation
Carly will be presenting her business plan to potential lenders and investors soon. Which of the following is not one of the suggested helpful tips for presenting the business plan?
She should use a great deal of technological jargon to impress the audience with her knowledge.
Which of the following is NOT one of the forces driving the entrepreneurial trend in our country?
Shift away from a service economy
Which form of ownership generally has the least ability to accumulate capital?
Sole proprietorship
Which of the following would be most likely to benefit from choosing S corporation status?
Startup companies anticipating net losses and Highly profitable firms with substantial dividends to pay out to shareholders only
________ involves developing a game plan to guide a company as it strives to accomplish its mission, goals, and objectives to keep it on its desired course.
Strategic management
________ are positive internal factors that contribute toward accomplishing the company's mission, goals, and objectives, while ________ are negative internal factors that inhibit the accomplishment of a firm's mission, goals, and objectives.
Strengths; weaknesses
A paradigm is a preconceived idea of what the world is, what it should be like, and how it should operate and this can influence creativity.
T
Entrepreneurs can encourage creative thinking in their employees by setting examples of creative behavior and rewarding creative behavior when exhibited by their employees.
T
Innovation must be a constant process because most ideas do not work and most innovations fail.
T
Mind-mapping is a graphical technique that encourages thinking on both sides of the brain, visually displays the various relationships among ideas, and improves the ability to view a problem from many sides.
T
The left brain is guided by linear, vertical thinking.
T
While most people see what they have always seen, creative entrepreneurs are able to see beyond preconceptions.
T
During a brainstorming session, company rank and department affiliation are irrelevant.
T?
A business plan is a written summary of an entrepreneur's proposed venture, its operational and financial details, its marketing opportunities and strategy, and its managers' skills and abilities.
True
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The "theory of inventive problem solving" is a left-brained, scientific, systematic process based on innovative patents and is referred to as:
TRIZ.
To which governmental office must applications for patents be submitted?
The U.S. Patent and Trademark Office
Which of the following documents must an entrepreneur file to create a limited liability company?
The articles of organization and The operating agreement only
Which of the following is true about the preparation of a business plan?
The elements of the plan may be standard, but the content should reflect the unique aspects of the business and the excitement of the entrepreneur.
The relationship between a company's mission, goals, and objectives and its strategy is best described by which of the following statements?
The mission, goals, and objectives spell out the ends the company wants to achieve, and the strategy defines the means for reaching them.
Which of the following is a benefit of entrepreneurship?
The opportunity to gain control over your own destiny, The opportunity to reach your full potential, The opportunity to do what you enjoy.
Which of the following statements is not true regarding the liquidation of an S corporation?
The owners file a statement of intent to dissolve with the secretary of state's office in each state where they conduct business.
The organization chart is described in which section of the business plan?
The plan of operation
Carlos founded the "Taco Factory" 20 years ago as a family-oriented restaurant. Over the years as they grew the business, he incorporated and sold stock to outside investors. Recently the stockholders voted to seek liquor licenses and to sell beer and hard liquor in the restaurants. Carlos opposed this, citing the history of the restaurant's "family" environment, but was voted down. Carlos has experienced which drawback of the corporate form of ownership?
The potential loss of control
Which of the following statements about women-owned businesses is false?
The survival rate of women-owned businesses is much lower than that of U.S. businesses overall.
Which stage of the creative process involves viewing the similarities and differences in the information collected?
Transformation
"Double taxation" refers to the fact that the corporation itself must pay taxes on its net profits, and the stockholders must also pay taxes on the portion of those same profits distributed to them as dividends.
True
"Increasing our market share from 8 percent to 10 percent by the end of the current fiscal year" is a good example of an effective objective.
True
A business plan should contain certain basic elements, but it should also be tailored to the individual company by emphasizing its particular personality and reflecting the entrepreneur's excitement for the business opportunity.
True
A business plan that fails to assess a company's competitors realistically makes the entrepreneur appear to be poorly prepared.
True
A common denominator in many partnership disputes is the lack of a written agreement clearly spelling out the roles, rights, and responsibilities of each partner.
True
A company pursuing a cost-leadership strategy strives to be the lowest-cost producer relative to its competitors in the industry.
True
A company's mission statement defines what it stands for, why it exists, and its reason for being.
True
A competitive profile matrix analyzes how well a company and its rivals match the key success factors in the industry.
True
A competitor analysis should include an analysis of direct competitors as well as significant and indirect competitors.
True
A corporation formed and chartered in Kansas is considered a domestic corporation when doing business in Kansas, and a foreign corporation when doing business in Missouri.
True
A danger of cost-leadership is that a company may misunderstand what processes actually drive its true costs.
True
A differentiation strategy frequently allows the company the opportunity to charge a higher price for its products or services.
True
A feasibility analysis is the process of determining whether an entrepreneur's idea is a viable foundation for creating a successful business.
True
A firm's strategy must focus on establishing for the firm the key success factors the entrepreneur has identified for the industry.
True
A focus strategy recognizes that not all markets are homogeneous.
True
A lender's primary concern in granting a loan is reassurance that the applicant will repay it, whereas an investor's primary concern is earning a satisfactory rate of return.
True
A limited liability company cannot have any more than two of the following corporate characteristics: limited liability, continuity of life, free transferability of interest, and centralized management.
True
A limited partner is personally liable only for the amount of money she has invested in the partnership.
True
A product or service feasibility analysis determines the degree to which a product or service idea appeals to potential customers and identifies the necessary resources.
True
A small business following a focus strategy attempts to serve its narrow target markets more effectively and efficiently than competitors trying to appeal to the broad market.
True
A small business owner can collect a great deal of information about competitors through a number of low-cost competitive intelligence methods.
True
A strategy is a road map of action for fulfilling a firm's mission, goals, and objectives.
True
A table of contents that allows lenders to navigate a business plan easily is an important element of any business plan.
True
A well-prepared business plan forces an entrepreneur to assess the venture's chances of success more objectively.
True
After a company's strengths and weaknesses are assessed, the strategic planning process should identify opportunities and threats facing the company and should isolate the key factors for success in business.
True
All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.
True
Although building a business plan does not guarantee an entrepreneur's success, it does increase his or her chances of succeeding in business.
True
Although creativity sometimes involves generating something from nothing, it more likely results in elaborating on the present, putting old things together in new ways, or taking something away to create something simpler or better.
True
Although not required by law, a written partnership agreement that spells out the terms of operating the partnership and the status of each partner should be developed.
True
Ambiguity tends to destroy creativity.
True
An S corporation can issue both voting and nonvoting common stock to its shareholders.
True
An S corporation maintains the advantages of the corporate form of ownership while having the ability to be taxed as a partnership.
True
An entrepreneur may find that the business plan indicates that the business concept is not viable. This is another potential benefit of writing a business plan; this revelation occurred before the owner committed significant resources -time and money - to the venture.
True
An important goal of the "marketing strategy" section of the business plan is to prove that there is a real market for the proposed good or service.
True
Because the entrepreneur is the driving force behind a business idea, he or she should also be the driving force behind the business plan.
True
Before an entrepreneur can build a successful strategy, she must establish a clear mission, goals, and objectives in order to have appropriate targets at which to aim her strategy.
True
Conducting successful competitive intelligence on rivals' strategies and actions may include researching their Web sites, buying their products to assess their quality, and watching for employment ads to determine the type of employees they are hiring.
True
Creativity and innovation are the signature of small, entrepreneurial businesses.
True
Creativity is the ability to develop new ideas and to discover new ways of looking at problems and opportunities.
True
Each partner in a limited liability partnership is a limited partner; there are no general partners.
True
Employees tend to rise-or fall-to the level of expectations entrepreneurs have of them.
True
Essential pieces of information for potential lenders and investors include the assumptions the entrepreneur uses to derive the financial forecasts and projections in the business plan.
True
Experts estimate that 70 to 90 percent of the competitive information a company needs already resides with employees who collect it in their daily dealings with suppliers, customers, and other industry contacts.
True
Failure is an important part of the creative process, as it provides a chance to learn how to succeed.
True
Generally, an industry is more attractive when quality substitute products are not readily available, the prices of substitute products are higher, and buyers' costs of switching products is high.
True
Goals and objectives provide targets to aim for and a basis for evaluating a company's performance.
True
Goals are the broad, long-range attributes that a business seeks to accomplish; objectives are more specific targets of performance.
True
Ideally, strategic planning is not an outcome but an ongoing process.
True
If a limited partner withdraws, sells his ownership in the partnership, or dies, the partnership is not forced into dissolution.
True
If a partnership agreement does not exist, the partnership will be governed by the Uniform Partnership Act.
True
If a sole proprietor dies, retires, or becomes incapacitated, the business automatically terminates.
True
In a business plan, both company goals and objectives should relate to the company's mission.
True
In the business and industry profile section of the business plan, the entrepreneur should provide information on the size of the market, growth trends, and the relative economic and competitive strength of the industry's major players.
True
Innovation is the ability to apply creative solutions to problems and opportunities to enhance or enrich people's lives.
True
Like an S corporation, a limited liability company does not pay income taxes; its income flows through to its owners, who pay taxes on their shares of the limited liability company's net income.
True
Limited liability partnerships (LLP) are where all partners in a business are limited partners, which offers the advantage of limited liability for the debts of the partnership.
True
Liquidating an S corporation involves several steps, including paying all taxes and debts, obtaining the written approval of shareholders to dissolve the company, filing a statement of intent to dissolve with the secretary of state's office and, finally, distributing all remaining assets of the corporation to shareholders.
True
Mind-mapping is a graphical technique that encourages thinking on both sides of the brain, visually displays the various relationships among ideas, and improves the ability to view a problem from many sides.
True
Narrower product lines, smaller customer bases, and more limited geographic areas give small companies a natural advantage over large businesses when preparing a strategic plan.
True
Objectives are short-term, specific targets that the small company plans to accomplish.
True
One danger in choosing a differentiation strategy is trying to differentiate based on something that the customer does not perceive as valuable.
True
One disadvantage of an S corporation is that the cost of many benefits-insurance, meals, lodging, and others-that are paid to shareholders with 2 percent or more of stock-cannot be deducted as business expenses for tax purposes and are considered taxable income.
True
One disadvantage of the partnership form of ownership is the great potential for personality and authority conflicts.
True
One key to building a successful differentiation strategy is to be better than competitors at some characteristic that customers value.
True
One of the advantages of a partnership over a proprietorship is the increased sources of capital and credit it offers.
True
One of the biggest changes entrepreneurs face is the shift in the economy from a base of financial to intellectual capital.
True
One of the goals of competitive analysis is to improve a firm's reaction time to competitor's actions.
True
One significant advantage of a corporation is the ability to attract capital.
True
Performing competitive intelligence on rivals' strategies and actions does not mean that entrepreneurs must engage in unethical or illegal espionage activities.
True
Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.
True
T/F The "two-thirds rule" says that only two-thirds of the entrepreneurs with a sound new business venture will get financing, that they will get only two-thirds of what they need, and that it will take them two-thirds longer to get it than they anticipated.
True
T/F The 21st century has seen record numbers of entrepreneurs launching businesses on a global basis.
True
T/F The corporation has the advantage of transferable ownership, which easily enables the corporation to sell shares to others or to transfer stock through inheritance.
True
T/F The executive summary of a business plan should summarize all of the relevant points of the proposed venture and should be concise-no more than two pages.
True
T/F The higher a small business scores on the 5 C's of credit, the greater its chances will be of receiving a loan.
True
T/F The limited liability company, like an S corporation, is a form of ownership that is a cross between a partnership and a corporation.
True
T/F The loan proposal portion of the business plan should include a realistic timetable for repayment or for investors to exit.
True
T/F The major problem with relying on the legal system to enforce ownership rights is the cost of infringement lawsuits, which can quickly exceed the budget of most small businesses.
True
T/F The most common reasons banks give for rejecting small business loan applications are undercapitalization and too much debt.
True
T/F The partnership, like the proprietorship, avoids the disadvantage of double taxation.
True
T/F The plan of operation section of the business plan should address how the business plans to retain key managers and employees.
True
T/F The rapidly accelerating rate of change has created an environment in which staying in a leadership position requires constant creativity, innovation, and entrepreneurship.
True
T/F There is no limit to the number of general partners a partnership may have, but it must have at least one general partner.
True
T/F To get external financing, an entrepreneur's business plan must pass the reality test, the competitive test, and the value test with potential lenders and investors.
True
T/F When "brainstorming," individuals should be encouraged to use "idea hitchhiking," or building new ideas on those already suggested.
True
TRIZ is an acronym for a systematic approach to help solve technical problems based on the study of hundreds of the most innovative patents.
True
The "two-thirds rule" says that only two-thirds of the entrepreneurs with a sound new business venture will get financing, that they will get only two-thirds of what they need, and that it will take them two-thirds longer to get it than they anticipated.
True
The business and industry profile section of the business plan should cover existing and anticipated profitability of firms in the targeted market segment and any significant entry or exit of firms.
True
The business strategy section of the business plan addresses the question of how the entrepreneur plans to achieve the mission, goals, and objectives he has established for his business venture.
True
The company's mission statement expresses in words the entrepreneur's vision for what her company is and what it is to become.
True
The corporation has the advantage of transferable ownership, which easily enables the corporation to sell shares to others or to transfer stock through inheritance.
True
The entrepreneur's "character" (even though it is an intangible factor) and the quality of the presentation are important factors in evaluating a loan proposal.
True
The five forces model would assess economies of scale factors in the "threat of new entrants" portion of the model.
True
The focal point of the entire strategic plan and the competitive strategy chosen should be the customer.
True
The higher a small business scores on the 5 C's of credit, the greater its chances will be of receiving a loan.
True
The illumination stage of the creative process is often called the "Eureka factor" and is characterized by a spontaneous breakthrough.
True
The key to a successful differentiation strategy is to build it on a core competency, something the company is uniquely good at doing in comparison to its competitors.
True
The limited liability company, like an S corporation, is a form of ownership that is a cross between a partnership and a corporation.
True
The loan proposal portion of the business plan should include a realistic timetable for repayment or for investors to exit.
True
The mission statement addresses the first question of any business venture: "What business am I in?"
True
The most common reasons banks give for rejecting small business loan applications are undercapitalization and too much debt.
True
The most effective way to communicate the values of a company to everyone it touches is to formulate an effective mission statement.
True
The most important factor in the success of a business venture is the quality of its management, and financial officers and investors weigh heavily the ability and experience of the firm's managers in their financing decisions.
True
The quality of the entrepreneur's business plan determines the first impression potential lenders and investors have of the company.
True
The reality test that a business plan must pass in order to attract financing from lenders and investors involves proving that a market for the company's product or service actually does exist, and that the company actually can build it for the cost estimates in the plan
True
The reality test that a business plan must pass in order to attract financing from lenders and investors involves proving that a market for the company's product or service actually does exist, and that the company actually can build it for the cost estimates in the plan.
True
The right brain relies on kaleidoscopic, lateral thinking.
True
The secret to good control is identifying and tracking key performance indicators.
True
The strategic planning process works best when employees are actively involved with managers in setting company goals and objectives.
True
The three components of intellectual capital are human, structural, and customer.
True
The value test that a business must pass in order to attract financing from lenders and investors involves proving to them that the venture offers a high probability of repayment or an attractive rate of return.
True
There is no limit to the number of general partners a partnership may have, but it must have at least one general partner.
True
To be effective, the small business owner should limit strategic analysis to only the two or three most significant opportunities facing the firm.
True
To be meaningful, an objective must include a time frame for achievement.
True
To evaluate the effectiveness of their strategies, some companies are developing balanced scorecards, a set of measurements unique to a company that includes both financial and operational measures and gives managers a quick, comprehensive picture of the company's total performance.
True
To form a limited liability company, an entrepreneur must file both the articles of incorporation and the operating agreement with the secretary of state.
True
To get external financing, an entrepreneur's business plan must pass the reality test, the competitive test, and the value test with potential lenders and investors.
True
To make a business plan more attractive, an entrepreneur should include a potential exit strategy as a way to "cash out" for investors.
True
Trademarks are distinctive words, symbols, designs, names, or logos used for company identification.
True
When "brainstorming," individuals should be encouraged to use "idea hitchhiking," or building new ideas on those already suggested.
True
When creating a balanced scorecard for his or her company, an entrepreneur should establish goals for each critical indicator of company performance and create meaningful measures for each one.
True
When describing their products and services in their business plans, entrepreneurs must remember that customers buy the benefits from products and services, not the features.
True
With the growth of the Internet, cloud computing, globalization, and increased competition, the business environment has become more turbulent and challenging.
True
It may appear in the incubation stage of the creative process that the entrepreneur is loafing, as he is taking time to reflect on the information collected.
True ?
Entrepreneurship requires both left- and right-brained thinking.
True?
For every 3,000 new product ideas, four make it to the development stage, two are actually launched, and only one becomes successful in the market.
True?
Right-brain thinking draws on the power of divergent reasoning, which is the ability to create a multitude of original, diverse ideas, while left-brain thinking counts on convergent reasoning, the ability to evaluate multiple ideas and choose the best solution to a given problem.
True?
T/F Although creativity sometimes involves generating something from nothing, it more likely results in elaborating on the present, putting old things together in new ways, or taking something away to create something simpler or better.
True???
The rapidly accelerating rate of change has created an environment in which staying in a leadership position requires constant creativity, innovation, and entrepreneurship.
True???
During a brainstorming session, company rank and department affiliation are irrelevant.
Ttue
Which of the following is not one of the ways entrepreneurs can stimulate their own creativity and encourage it among their workers?
View challenges as problems
Which of the following questions will probably not be addressed in the marketing strategy section of the business plan?
What exit policy do I have in place for my investors?
Entrepreneurs typically possess:
a high level of commitment, have a tolerance for ambiguity, are flexible and tenacious.
The "Das Spelunker" corporation, formed in Germany and conducting business in the U.S., is considered to be a(n) ________ corporation.
alien
A competitive profile matrix:
allows the small business owner to evaluate her firm against competitors on the key success factors for the industry.
An entrepreneurial "secret" for creating value in the marketplace is:
applying creativity and innovation to solve problems.
Small companies:
are the leaders in offering training and advancement opportunities to workers
Entrepreneurs may find benefit from the Internet due to its potential:
as a relatively low-cost solution to expand its revenue-generating abilities.
The primary purpose of the five forces matrix is to:
assign values to each of the five elements.
Switching costs, the number of buyers, and if the items represent a relatively small portion of the cost of finished products are key considerations regarding the:
bargaining power of buyers.
When creating financial forecasts in a business plan for a proposed venture, an entrepreneur should:
be sure that all forecasts are realistic.
Issues such as market size, growth trends, ease of market entry and exit, the presence of cyclical or seasonal sales trends, and the competitive dynamics of an industry appear in the ________ section of the business plan.
business and industry profile
The ________ acquaints lenders and investors with the nature of the business and the general goals and objectives of the company.
business and industry profile
The section that describes "how to get there" and describes a competitive edge that sets the business apart is referred to as the:
business strategy.
A joint venture is different from a partnership in that the joint venture:
can be formed only by two individuals.
The financial feasibility analysis takes these aspects into consideration:
capital requirements, estimated earnings, and return on investment.
A synonym for capacity is:
cash flow.
Entrepreneurial couples who work together as co-owners of their business are referred to as:
copreneurs.
Melinda and John Perez, both corporate attorneys in New York City, have grown tired of their lengthy daily commute, the stress of their jobs, and the overbearing policies of their employers. They have decided to leave their six-figure jobs and together open a guide service in Wyoming. Melinda and John are examples of:
corporate castoffs and corporate dropouts.
An entrepreneur is one who:
creates a new business concept for the purpose of achieving profit and growth by assembling the necessary resources to capitalize on identified opportunities.
The ability to develop new ideas and to discover new ways of looking at problems and opportunities is called:
creativity.
The focus of the competitor analysis section of the business plan is on:
demonstrating your company's advantage over competitors.
Your ________ competitors offer the same products and services, and customers often compare prices, features, and deals from these competitors as they shop.
direct
The ability to see the differences among various data and events is called:
divergent thinking
The ability to see the differences among various data and events is called:
divergent thinking.
One of the most significant economic developments in recent business history relates to the:
entrepreneurial spirit.
Gathering competitive intelligence, such as "dumpster diving" in a competitors trash, may raise questions regarding:
ethical standards.
The ________ is also known as the "elevator pitch" and is written last, but is included as the first part of the business plan; it should summarize all the relevant points in about two pages.
executive summary
Entrepreneurs can stimulate their own creativity and encourage it among workers by:
expecting and tolerating failure.
The only people who ________ are those who never do anything or never attempt anything new.
fail
Refer to the following information to answer the question(s) below: Describing her company's revolutionary design for a bottle cap, Kyoto says, "It has a special locking mechanism that you know is engaged when a red panel is showing through this little window on top of the cap. If you want to keep unauthorized hands-for instance, those of children-from opening the bottle, you engage the locking mechanism. Unlike other childproof caps, however, this design does not frustrate adults who might have arthritis and elderly people whose grip may not be as strong as it once was."Removing the cap from the bottle in no time with just a few turns, Kyoto says, "They can open the cap quite easily by disengaging the locking mechanism this way ... see? You get the safety of a childproof cap without the problems most adults have getting them off!" The special locking mechanism on Kyoto's new cap is a ________ of the product.
feature
A ________ is a descriptive fact about a product or service; a ________ is what the customer gains from that characteristic.
feature; benefit
Shere Vincente operates a travel service that specializes in arranging trips for women, giving special attention to their needs and preferences, from security and comfort to activities and events designed to appeal to her target customers. Vincente is pursuing a ________ strategy.
focus
When formulating a marketing strategy, small companies usually are most successful when they:
focus on a particular market niche where they can excel at meeting customers' needs and wants.
The technique of ________ uses three columns that allows the entrepreneur to weigh both the advantages and the disadvantages of a particular decision and work to maximize the variables that support it while minimizing those that work against it.
force-field analysis
Mind-mapping is a useful tool for jump-starting creativity. It includes all of the following except:
forcing creativity when ideas start to trickle.
Acme Corporation is chartered in Delaware, but its primary area of operation is in South Carolina. In South Carolina, Acme would be considered a(n) ________ corporation.
foreign
In a partnership, the ________ partner(s) has (have) unlimited liability for the partnership's debts.
general
The primary purpose of a business plan is to:
guide a company by charting its future course and devising a strategy for success.
The demographic attributes of successful entrepreneurs are:
highly diverse relating to age, gender, and ethnicity.
In the business strategy section of the business plan, the entrepreneur should explain to investors:
how she intends to accomplish the company's goals and objectives.
In a large organization, an individual may be stifled and limited by a wide variety of factors. However, by owning one's own business, the only limits are one's own creativity, talent, and determination. In this sense, small business ownership offers the advantage of the:
opportunity to reach one's full potential.
Kevin Abt noticed that people were cooking meals in their homes less often but wanted to avoid the hassle of going out to eat. They wanted to "eat in" without cooking. Abt launched a company, Takeout Taxi, that delivers restaurant-prepared food to his customers' homes and businesses. Takeout Taxi is the result of a(n):
opportunity.
Income from a joint venture is taxed as the income from a(n):
partnership.
All of the following are advantages of a partnership except:
partnerships have the greatest ability to accumulate capital of all of the forms of ownership
The plan of operation of the company within the business plan should detail:
plans for keeping the important officers in place with the company.
Porter's five forces model assesses industry attractiveness by surveying these five factors:
potential entrants, suppliers, buyers, substitutes, and rivalry among existing firms.
Small firms pursuing a cost-leadership strategy have an advantage in reaching customers whose primary purchase criterion is:
price.
Conducting ________ research involves collecting data firsthand and analyzing it while ________ research involves gathering data that has already been complied and is available.
primary; secondary
Potential investors tend to believe that if an entrepreneur cannot develop a good plan, the entrepreneur:
probably lacks the discipline to run a business.
An analysis that determines the degree to which a product or service idea appeals to potential customers and identifies the resources necessary to produce the product or provide the service is referred to as:
product or service feasibility analysis.
Most entrepreneurs believe that ________ is what matters most, but ________ is the most important financial resource for a small business owner.
profit; cash
Proving that a profitable market exists involves:
proving that customers in the marketplace need or want the good or service and are willing to pay for it and documenting claims about market size and growth rates with as much factual information as possible only
The premise behind ________ is that transforming an idea into an actual model will lead to improvements in its design.
rapid prototyping
The ________ test that a business plan must pass in order to attract financing from lenders and investors involves proving that a market for the company's product or service actually does exist and that the company actually can build it for the cost estimates included in the plan.
reality
The majority of small companies are concentrated in the ________ and ________ industries.
retail; service
The recent number of job losses in large corporations compared to the jobs created by small business has changed the perception of ________ for launching a new business.
risk
The strongest of the five forces in most industries is:
rivalry among companies competing in the industry.
All of the following represent barriers to creativity that entrepreneurs impose upon themselves except:
searching for more than one answer.
Entrepreneurs who repeatedly start businesses and grow to a sustainable size before striking out again are known as ________ entrepreneurs.
serial
The executive summary section of the business plan:
should summarize the essence of the plan in a capsulated form and should capture the reader's attention.
Entrepreneurs that use their skills to create a profitable business that is designed to achieve social and environmental goals for the common good are known as:
social entrepreneurs.
Copyrights protect the creator of original works such as:
software, choreography, and motion pictures.
Marco is opening a new computer repair shop. He is owner and sole employee. He has paid the appropriate fees and licensing costs and begun his business. This is an example of a(n):
sole proprietorship
The most common form of business ownership that is also the simplest to create is the:
sole proprietorship.
The reality test that a business plan must pass in order to attract financing from lenders and investors involves proving:
that a market for the company's product or service actually does exist and that the company can actually build it for the cost estimates included in the plan.
The value test that a business plan must pass in order to attract financing from lenders and investors involves proving:
that the business venture will provide lenders and investors a high probability of repayment or an attractive rate of return.
The competitive test that a business plan must pass in order to attract financing from lenders and investors involves proving:
that the company can gain a competitive advantage over its key competitors.
The criteria lenders and investors use to evaluate the credit worthiness of entrepreneurs that are seeking financing-including capital, capacity, collateral, character, and conditions-are referred to as:
the five C's of credit.
A corporation receives its charter from:
the state.
Harvard's Ted Levitt says that creativity is ________ new things, and innovation is ________ new things.
thinking; doing
Low capital requirements, cost advantages that are not related to company size, and the lack of brand loyalty are considerations regarding the:
threat of new entrants to the industry.
The force from the five forces model that considers economies of scale, initial capital requirements, cost advantages relevant to company size, and lack of brand loyalty is the:
threat of new entrants.
Maria Sanchez is the owner of the Main Street Café and a new restaurant opens a few blocks away. From Maria's perspective, this new restaurant constitutes a(n):
threat.
Employees must be given the tools and resources they need to be creative. One of the most valuable set of resources is:
time, support and encouragement.
The second essential purpose for creating a business plan is:
to attract lenders and investors.
Potential drawbacks of entrepreneurship may include:
uncertainty of income, risk, long hours, and high stress.
The most common reason cited by banks for rejecting small business loans is:
undercapitalization and too much debt.
All of the following are characteristics of the typical entrepreneur except:
value of money over achievement.
