Chapter 5 Multiple Choice

What percentage of American businesses is considered small businesses?

99.7

With set-aside programs for small businesses, up to ___ of certain government contracts are designated for small businesses.

23 percent

What percentage of small business survives the first five years of operations?

50 percent

Most Manufacturing businesses are considered small if they employ fewer than ____ workers

500

Which of the following is not a benefit to the franchisor in a franchise agreement?

A franchisor is in control of the daily operations of a much larger business.

Which of the following is most likely to be a cooperative business operation? A limited-liability corporation A group of neighboring farm owners A mom-and-pop grocery store A chain of restaurants

A group of neighboring farm owners

Which of the following is least likely to be a small business? A restaurant A construction company A nursing home An auto repair shop

A nursing home

How does a partnership differ from a sole proprietorship?

A partnership is more difficult to dissolve than a sole proprietorship

Which type of business is most likely to operate as a cooperative business? Agricultural Textile Real Estate Taxi Service

Agricultural

___ is an organization that provides temporary low-cost, shared facilities to small start-up ventures.

Business incubator

Which of the following is NOT an advantage of a corporation? Limited liability for the owners Double taxation on corporate earnings Continuity Expanded financial capacity

Double taxation on corporate earnings

Why do home-based businesses often have lower costs?

Funds that are not being used for leasing or warehouse space can be directed into the business.

Which industry listed below is NOT dominated by small business? Florists Hospitals Funeral Homes Hair Salons

Hospitals

What characterizes a small business?

It is independently owned and operated and is not dominant in its field.

A(n) _____ consists of two or more firms combined to form one company

Merger

Which of the following is not one of the customary services of the Small Business Administration?

Providing direct loans

Which of the following does not grant direct loans to small businesses?

Small Business Administration

Which is the most common form of business ownership? Corporation Partnership Public Ownership Sole proprietorship

Sole proprietorship

Which of the following is a major draw-back of family-owned businesses? Having full control of business operations Double taxation on income Financially benefiting from own ideas/ efforts Succession

Succession

Who owns the corporation?

The shareholders

Small businesses are more likely than large ones to hire:

The youngest workers.

Which of the following is an advantage of mergers? They guarantee future profitability They allow a company to diversify and increase customer base They offer one company with the complete control of another They allow firms to buy a division or subsidiary from another firm

They allow a company to diversify and increase customer base

Which best describes the contribution of U.S. small businesses in world markets?

They export nearly a third of all U.S. products each year.

Which of the following is true of S Corporations? They limit owner's liability They help owners avoid double taxation They have fewer than 100 shareholders All of these answers are correct

They have fewer than 100 shareholders

Which of the following is true of owners of common stock? They have preferred rights in case of bankruptcy They hire the Chief Executive Officer They have voting rights buy only a residual claim on the firm's assets they make most of the major decisions

They have voting rights buy only a residual claim on the firm's assets

___ out of every three new jobs are created by small business.

Two

A written document that provides a statement of a company's goals, methods for achieving goals, and standards for measurement is called:

a business plan

A legal organization with assests and liabilities separate from those of the owner is called:

a corporation

An effective business plan should include: the vision of the founder(s) and its mission a description of potential competitors a description of what makes the company unique all of these answers are correct

all of these answers

Small businesses often fail due to: all of these answers are correct management shortcomings difficulty dealing with government regulations inadequate financing

all of these answers are correct

Cooperatives allow members to: share equipment benefit from group purchasing discounts share in other efforts such as marketing do all of these

do all of these

A corporation that does business in states other than the state in which it filed incorporation papers is called a(n):

foreign corporation

A(n) ____ combines firms in the same industry that wish to diversify, increase their customer base, cut costs, or offer expanded product lines.

horizontal merger

Small-business loans often used to buy equipment or operate a business are called:

microloans

Amtrak is an example of: a partnership a limited liability corporation private ownership of a for-profit corporation a non-for-profit franchise

private ownership of a for-profit corporation

The primary purpose for developing a business plan is:

to obtain financing for the business

A merger between two companies in different levels of the production and marketing of a product is called a(n) ______ merger

vertical