business ch 3 practice questions
How is the U.S. economy affected by small businesses?
Small businesses affect the U.S. economy through job creation and innovation and by making products for and selling products made by big businesses. Small businesses are an important source of new jobs in the United States. Innovations are as likely to come from small businesses as big businesses. Finally, most of the products made by big businesses are sold to consumers by small businesses. Big businesses often depend on small businesses as suppliers as well. By creating jobs, fostering innovation, and providing goods and services, small businesses have a positive effect on the U.S. economy.
What does a start-up company need in order to estimate the required size of a plant, store, or office, inventory levels, and size of staff? A) Sales forecast B) Tax estimate C) Business objective D) Stock options E) Funding source
A
What is considered to be a significant disadvantage of owning a franchise? A) Start-up costs B) Operational guidelines C) Difficulty obtaining loans D) Double taxation E) Competition
A
What is the major drawback of accepting venture capital? A) Sharing company control B) Having to pay high interest rates C) Limiting expansion D) Facing a short repayment period E) Having to write proposals
A
Which of the following BEST defines those who assume the risk of business ownership? A) Entrepreneurs B) Customers C) Corporate partners D) The Small Business Administration E) Banks
A
Who constitutes the membership of SCORE? A) Retired executives B) Venture capitalists C) Company officers D) Commercial lenders E) Successful entrepreneurs
A
What is first mover advantage? A) The concept that the first in the market will make the most money B) The concept that a firm who exploits an opportunity before others has an advantage C) The concept that there is an advantage in leaving a market when it becomes flooded D) The concept that large organizations cannot take advantage of an opportunity as quickly as an entrepreneur E) The concept that there is more risk being first, but also more reward, if successful
B
What is the process of seeking business opportunities under conditions of risk? A) Investment B) Entrepreneurship C) Leadership D) Diversification E) Growth
B
Which distinctive competency must an entrepreneur identify when attempting to enter a market segment that is not currently being exploited? A) The ability to identify new markets B) The ability to identify niche markets C) The ability to differentiate themselves from others in the market D) The ability to gauge prices to get the highest return without driving away customers E) The ability to move quickly to take advantage of new opportunities
B
Which of the following are groups of small investors seeking to make profits on companies with rapid growth potential? A) Community banks B) Venture capital companies C) Equity managers D) Government securities dealers E) Stock brokers
B
Which of the following can assist a small business and helps to determine standards based on industry? A) The U.S. Department of Commerce B) The Small Business Administration C) A franchise D) Venture capitalist E) The Small Business Development Center
B
Which of the following is federally licensed to borrow money from the Small Business Administration to invest in or lend to small businesses? A) SCORE B) SBICs C) SBDC D) FDIC E) SEC
B
In a small business, who determines prices for wholesalers and customers? A) Customers B) Franchise owners C) Market forces D) Small business administration E) Small business owners
C
What is the MOST important source of money for new business start-ups? A) Banks B) The SBA C) Personal resources D) Government grants E) Venture capital
C
What is the first step in becoming an entrepreneur? A) Deciding to proceed B) Formulating a business plan C) Identifying distinctive competencies D) Searching for capital to invest E) Implementing plans and opening
C
What term is most closely associated with enterprises that pursue entrepreneurship with the goal of independence from working for someone else with a reasonable degree of financial security? A) Vision B) New ventures C) Small business D) LLC E) Dominance
C
Which entity is defined as independent and has little influence on its market? A) Corporation B) Joint venture C) Small business D) Partnership E) Government agency
C
Which key element of a business plan will determine inventory, size of space required, and number of employees needed? A) Financial planning B) Comparing existing businesses C) Sales forecasting D) Setting goals and objectives E) Identifying strategies and how to implement them
C
Which of the following types of venue is favored by small-business retailers? A) Superstore B) Catalog showroom C) Specialty shop D) Department store E) Studio workroom
C
The U.S. Department of Commerce considers a business "small" if it has fewer than how many employees? A) 10 B) 50 C) 100 D) 500 E) 1,500
D
What does an entrepreneur use to summarize his or her business strategy for a proposed new venture? A) Success chart B) Director's guideline C) Financial blueprint D) Business plan E) Balance sheet
D
What is the advantage to starting a business from scratch instead of buying an existing business? A) There is a proven ability to attract customers. B) Profit is generated sooner. C) There is a stronger relationship with lenders and other stakeholders. D) There are no ill-effects from the previous owner. E) There is a clearer picture of what to expect in terms of start-up.
D
When an entrepreneur has the goals of growth and expansion, with the vision of turning the business into a large business, what term is used when referring to the business? A) Visionary B) Small Business C) Diversification D) Start-up E) Expansionist
D
When an investor is not interested in owning their own business, why do they need to understand entrepreneurship? A) To understand why someone would want to work so hard for a small return B) To determine the key characteristics of success C) To understand how to convert a great idea to a profitable idea D) To assess the market potential for up-and-coming businesses E) To learn how to set up a business plan
D
The contribution a small business on the U.S. economy is measured based on its impact to which economic systems? A) Bank loans, and contributions to big business B) International trade, interest rates, and the service industry C) Bank loans and innovation D) The service industry, the stock market, and job creation E) Job creation, contributions to big business, and innovation
E
Which of the following helps entrepreneurs gain skills that are essential for running a business? A) ESOP B) SBIC C) SEC D) LLC E) SBA
E
Which of the following industry groups is the fastest growing segment of small business enterprise? A) Manufacturing B) Wholesaling C) Retailing D) Transportation E) Services
E
Why is it difficult to compare relative job growth for different-sized businesses? A) Sourcing up-to-date employment figures is difficult. B) Many small businesses experience rapid unreported growth. C) Spheres of influence overlap between the small and big business sectors. D) Staff size of small businesses tends to change faster than staff size of big businesses. E) It is hard to determine the cutoff point at which a small business becomes a large business.
E
Explain entrepreneurship and describe key entrepreneurial characteristics.
Entrepreneurs are people who assume the risk of business ownership. Entrepreneurship is the process of seeking business opportunities under conditions of risk. Some entrepreneurs have a goal of independence and financial security, whereas others want to launch a new venture that can be grown into a large business. Most successful entrepreneurs are resourceful and concerned for customer relations. They have a strong desire to be their own bosses and can handle ambiguity and surprises. Today's entrepreneur is often an open-minded leader who relies on networks, business plans, and consensus and is just as likely to be female as male. Finally, although successful entrepreneurs understand the role of risk, they do not necessarily regard what they do as being risky.
T/F : Major innovations are most likely to come from large corporations.
FALSE
T/F : Most businesses in the United States are large businesses with more than 500 employees.
FALSE
T/F : The Small Business Administration is the government agency charged with owning small businesses.
FALSE
T/F : Most successful entrepreneurs have a strong desire to be their own bosses.
TRUE
T/F : People who assume the risk of business ownership with a primary goal of growth and expansion are called entrepreneurs.
TRUE
T/F : Small businesses produce more patents per employee than large patenting firms.
TRUE
T/F : The Small Business Administration (SBA) may consider a business with as many as 1500 employees to be small as long as it has low annual revenues.
TRUE