Chapter 5 Quiz

Venture capital:

is financing obtained from investment firms that specialize in financing small, high-growth companies

Michael Bronner made a fortune in the direct marketing business as the cofounder and CEO of Bronner Slosberg Humphrey, a wildly successful direct-marketing firm. His newest venture, Upromise Inc., enlists some of America's largest corporations to help families pay for college and is extremely successful. Entrepreneur Bonner would more than likely have which of the following characteristics?

All of the above Visionary Independent Self-confident Ambitious

_____ financing is a form of financing consisting of funds raised through the sale of stock in a business.

Equity

Mark Ghermizian had quit his job and was looking to start a small business so he could be his own boss. When he read that people spend up to fifteen minutes every day staring at a bathroom stall door, he decided he would find advertisers who wanted to pay to have their advertising messages on bathroom stall doors. Since he has his idea, Ghermizian's next step is to:

choose a form of business organization

When Art Baer read that Singapore would lift its ban on chewing gum, he thought to himself, "There has to be a market there." Baer, 26, knew if he was going to move beyond the daydreaming stage, he had to move fast. After investing $20,000 of his own money into developing a product he called Impress Gum, Baer quit his job, flew to Singapore, talked to the right people in the government, lined up a manufacturer, and hired a marketing firm to promote his gum, which fights tooth decay. Baer is an example of a(n) ______ entrepreneur.

classic

Jill Hansom borrowed $40,000 from a credit union to start a company that makes and sells peach salsa. Hansom used _____ financing.

debt

Once the business plan is finished, the next step is to:

find financing for the business

When Allison Logue found out her children were allergic to corn, she started looking for sweets and starches that were corn-free and was dismayed to find very few such products on the market. As a result, she has started her own small business to produce and market corn-free desserts. It is a small market, and Logue plans to keep her business small. Logue is an example of a(n):

micropreneur

_____ is at the core of most business failures.

Inadequate planning

The difference between the small business owner and the entrepreneur is that the entrepreneur:

assumes the risk of the business

Businesses close down for many reasons. Which of the following is NOT a typical reason for a business failure?

Expenses were lower than the owner expected.

A business plan:

describes in detail the idea for the new business and how it will be carried out

In buying an existing business, the prospective buyer should ask questions about the operation of the business. Which of the following would be an inappropriate question to ask?

What are you going to do with the down payment?

Kathy Elliot has decided that she will start an Internet company to sell reliable used cars to customers nationwide. She has decided to use the sole proprietorship business format. Elliot's next step is to write a formal _____ before she applies for a business loan.

business plan

After graduating from college, Joseph Tantillo decided to start a retail Web site that specializes in personalized Greek apparel. To fund his Web site, he borrowed money from his parents (who expect to be repaid with interest). In other words, he used _____ financing.

debt

Andy Yocom saw prime advertising space on the flags on the golf course. He reasoned that any marketing messages would get prominent attention if they were placed on the flags since golfers focus on them when they take their shots. As a result Yocom used his own initiative and money to start Invision Golf Group Inc. Yocom is an example of a(n):

entrepreneur

Lachlan Stuart is employed by International Paper, a company that values his vision and creativity. To stay ahead in a very competitive industry, International Paper gives Stuart, and his division has almost complete autonomy to develop innovative and effective communications. Stuart is an example of a(n):

intrapreneur

Many classic entrepreneurs are _____ who start small and plan to keep their business small.

micropreneurs

A _____ is a formal written statement that describes in detail the idea for a new business and how it will be carried out.

mission statement

Which of the following elements does NOT typically appear in a well-prepared business plan?

names of all employees

An entrepreneur is a person who _____ a business.

owns and operates

Intrapreneurs

receive regular salaries and employee benefits have the characteristics of creativity, vision, and risk taking. have a high degree of autonomy in spite of the fact they work for a large corporation run mini-companies within large corporations

Angel investors:

provide funding for start-up businesses

A common use of business plans is to:

persuade lenders and investors to finance the venture

_____ financing is a form of business financing consisting of borrowed funds that must be repaid with interest over a stated time period.

Debt

_____ are entrepreneurs who apply their creativity, vision, and risk taking within a large corporation rather than starting a company of their own. They enjoy a high degree of autonomy while receiving a regular salary and financial backing from their employer.

Intrapreneurs

The two forms of business financing are _____ (borrowed funds) and _____ (ownership funds).

debt; equity

Jon P. Farmer is the founder of Kolopua Hawaii LLC, a company that markets Pure Hawaiian Air. Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they get off the plane in Hawaii. Retailing for about $5 apiece, the bottles are sold at gift shops in Hawaii, as well as to travel agents nationwide who give them to clients. As a(n) _____, Farmer's annual income exceeds $100,000 annually.

entrepreneur

Jeff Arnold and Reggie Bradford created WebMD, an Internet provider of health care information. During the development of this high-growth company, Arnold and Bradford attracted a group of investors who purchased stock in their company and provided them with ______ financing.

equity

In 2000, Eric Baker and Jeff Fluhr came up with a concept that would do away with scalping if they had their wish, and everyone used StubHub.com. The Internet company brings people who want tickets and people who have tickets that they are not using together. The company has assisted in the sale of tens of millions dollars worth of tickets annually and is always trying to sell more. It charges a small fee for its assistance. Baker and Fluhr would be classified as:

growth-oriented entrepreneur