Entrepreneurship Final Exam
general and limited are two broad categories of ___
partnership
calculate the value of a business assuming a total asset value of $255,000 and an acquisition premium of 3.6 times the asset.
$918,000 (255,000 x 3.6)
Corporations developed by the U.S. legal system
-Subchapter S -Subchapter C -LLC
when preparing a business for sale, it is important that its operational procedures are___ for easy handover....
-codified -written -simplified
which are trademarked by most large companies
-company symbols -company tag lines -company name
which are characteristics of credit cards as a form of non equity investment?
-generally tied to a much higher interest rate than bank loan -typically have a set upper limit
board of advisors
-group is composed of individuals outside of the business -group is formed at the discretion of the founder -group advises the founder of key issues
ways entrepreneurial businesses can act as catalysts for societal change?
-have an understanding of local community -willing to pursue smaller markets ignored by large corporations
which is true regarding liability insurance?
-helps protect against lawsuit judgments -covers the business for accidents -covers product negligence
identify the reasons individuals can become frustrated with working in a large corporation
-lack of promotion opportunities -inflexibility of large corporations in dealing with the needs of family
drawbacks of sole proprietorships?
-liability of the business is the responsibility of the single owner -lack of legitimacy -formation is limited
disadvantage of Subchapter S corporation is the limit of shareholders
-limit of 75 shareholders
disadvantages of subchapter S corporations
-limit on shareholders -may require paperwork -more complex
in a limited partnership is considered to be a passive investor and his or her liability is limited to his or her investment
-limited
involves a contractual agreement whereby the business receives some amount of money that must be repaid
-loan
asset-based
-loan provide for the purchase of a necessary asset for the business
Characteristic of general partnership similar to sole proprietorships
-owners report their shares of losses or profits
typical advantage of having suppliers invest in a new business?
-refrain from trying to run the business -do not aim to take the business over
what are the critical elements an entrepreneur must solve for success?
-sufficient resources to get the business to a point where it is self funding -develop an ability to generate consistent and growing sales -sustainable operating profit margin
advantages of having suppliers in a business
-suppliers refrain from trying to run the business -suppliers do not aim to take the business over if it does particularly well
which of the following is a typical disadvantage of having suppliers invest in a business?
-the suppliers deal involves an exclusivity agreement
Uniform Partnership Act/revised uniform partnership act
-their provisions do not cover issues like non complete agreements -they are an effective means to handle the basics of partnership
companies can test their job candidates if
-there is a direct link between performance on the test and the skills required on the job
true statements about the uniform partnership act and the revised uniform partnership act
-they are an effective means to handle the basics of partnership -their provisions do not cover issues like noncompete agreements
which questions should be considered by a new business owner before entering not a lease contract?
-who is responsible for maintenance and other facilities issues -who has to carry the liability insurance -can the business owner renew the lease after it expires -who would be responsible for making improvements to facilities
recently become the most popular form of incorporation
-LLC
subchapter S and Subchapter C corporations take their names from the subchapters in the
-international revenue
recent trends indicate larger corporations have been ___, while entrepreneurial businesses have been_____ rapidly.
Downsizing; growing
what is the condition that allows the long run average cost to continue downward as production increases?
Economies of scale
in order to get the word out that your business is for sale, you might consider contacting:
-suppliers -customers -competitors -accountant -business broker
fair labor standards act
-covers all workers except those who work on small farms
examples of hard assets
-equipment -buildings -cash -signed contracts
which questions an entrepreneur should address regarding education?
-have you attended any unusual education programs? -have you taken any specialized training in any specific area? -what courses taken were particularly enjoyable?
advantage of the subchapter S corporation
-it allows the owners to report their income or losses on their personal income tax returns
worker's comp
-provide worker comp insurance that is regulated by each state -aim to provide some type of wages to employees who are disabled
which statements regarding bonus systems are correct?
-similar to profit sharing -based on employees performance -no as well defined as profit sharing
Characteristics of entrepreneurial firms
-startup is self funded -number of employees will not be expected to grow beyond 100 -operation is designed in image of founder
insurance covers liability for workers who get injured on the job
-worker's comp
a _____ _____ fund is a fund that is usually organized as a limited partnership and is organized to make significant equity investments in high-growth ventures
venture capital
the business owner whose business is both a ______ and a ______ is difficult to beat.
vocation and avocation
which form of bankruptcy is used by family farming businesses?
chapter 12
in what period did the United States see a decline in large multinational firms and a rise of new opportunities for business?
late 1970s to early 1980s
which are forms of business has two classes of partners?
limited liability partnership
the steps in the process of generating ideas do not occur in a ____ fashion but should occur in a ___ manner
linear; interactive
venture capital fund
-includes limited partners seeking high returns -general partner who investigates and invests in each business
which are goals of the business plan for a new entrepreneurial business?
-provide investors with necessary info -to be a guide to managing business -to provide self evaluation
which items should be included on the payroll record?
-taxes -number of hours worked -benefit deductions -base pay and overtime pay rate
hiring process
-writing a description -advertising for a job position
rank list of chart of accounts
1. income category 2. expense category 3. asset category
a trade mark is valid for ____ years and can be renewed...
10
a business plan for a small business typically runs ___ pages long
15-25
assuming a net profit of $350,000 and an industry multiple of 12, calculate the business using the market estimation technique.
4,200,000 (350,000 x 12)
the repayment rate on micro loans is
99%
effective application of ____ is one means to limit liability concerns of the new venture
insurance
Characteristic of a general partnership that is different from that of a sole proprietorship
partners are generally held to be jointly liable for all debts incurred by the partnership
an individuals work experience builds _____ sets that can have direct applicability to the pursuit of a new business
skill
each type of business will require different ___ frames
time
banks will lend money for establishment and maintenance by arranging
- revolving line of credit
involves the leasing of equipment from manufacturers or third-base party
-asset lease
outcomes of a poorly managed credit card
-increase in the interest rate -possible bankruptcy of a firm
characteristics of loans as a source of funding for new business
-often repaid monthly -secured by assets or a personal guarantee
research suggests that successful new business ideas are NOT determines by your:
-race -religion -gender -parents
threats to operational financing
-rapid expansion costs -high inventory needs -high development costs -entrepreneurial team with low asset base
which are true regarding accounts payable?
-record should include date paid..... -all invoices received should be recorded -a record of payment toward each invoice
inventory should be taken at
-starting inventory -ending inventory -units sold
legal protection of the intellectual property that is associated with a specific business
-trademark
when are credit cards a good method of managing cash flow?
-when paid off each month -when used as a tracking system -when used on short term basis
venture capital-backed business plan typically runs from ___ pages long
25-45
a ___ that uses your education is a potential source of business
Opportunity
the ____ system of a firm is a powerful asset that should be used as a fine-grained tool...
accounting
unlike subchapter C, a limited liability
allows for the flexible treatment of profits from the organization
_____ insures businesses from damages caused by workers in the performance of their jobs
bonding
credit cards are a form of equity investment
false
The success of entrepreneurial businesses occurs because they are simply more _____ than larger corporate counterparts.
focused
the success of entrepreneurial businesses occurs because they are simply more ___ than their larger counterparts.
focused
when discounting the cash flow, the discount rate remains the same while the factor____ as you move father away from today.
increases
all new businesses inherent amount of ____ associated with the starting and operation of the business
risk
poorly performing employee is said to have
a triple impact
which form of funding is used by a business to conserve cash and maintain the last versions of whatever equipment is available?
asset lease
which business forms are required to hold annual board meetings and file reports....
-SCC -SSC
Disadvantage of factoring for a new business?
business will not receive the full amount of the debt due
typical requirements for a new business to obtain a city or county business license
-should pay a set fee, usually less that $100 -should agree to report basic information about its performance on a set schedule
accrual-based accounting system
-subchapter C corporations, partnerships, or trusts use this
accepting BLANK can limit a firms ability to shop around for a cheaper source.
-supplier credit
_____ are often for only a few dollars each and are made directly to entrepreneurs to encourage...
micro loans
the initial analysis is a process of:
moving from three to five ideas to a single idea
threats to profit margin, threats to operational financing, and threats to sales generation.....
risk
who is associated not only with the success of the industrial base but also with great abuses in business?
robber barons
most important single factor in the businesses success?
the business owner
leading source of venture capital
-Microsoft -Intel -Cisco
funding received by a business by soliciting a large number of very small investors usually via internet is called Relatively new means of raising capital that may result in either an equity approach of in-kind exchange
-crowdfunding
which are considered alternative sourcing tools for funding a business?
-crowdfunding -crowd sourcing
generic term used to describe any type of non equity funding any form of capital infusion that must be paid back with interest
-debt
which is true regarding equity investment?
-founder must clearly outline what rights and expectations each investor has -in the case of dissolution... -equity investment involves selling a percentage of the business to outside party
which are reasons why entrepreneurial businesses are successful?
-free to place energy into satisfying the needs of customers -fewer layers of management -tend to be more focused than large corporations
which of the following are reasons for the recent growth in number of women starting new businesses?
-frustration with the glass ceiling -greater control over work-life balance
accounting system and the data flow management provide information on how the BLANK will be used by the business
-funding
which are elements required when forming a subchapter C or subchapter S corporation?
-general nature of business -location of corporate headquarters -names, addresses, and titles of all founders
closure of military bases
-higher income growth -offered tax breaks and programs -experienced increases
important feature of a subchapter C corporation
-number of shareholders that an organization can obtain
which of the following typically distribute grants?
-private foundations -government
characteristics of limited partners in a limited liability partnership (LLC)
-they are considered passive investors and their liability is limited to their investment in the business -they are typically allowed to work for the firm
which of the following characteristics of venture capital-backed firms?
-they are formed with harvest plan in place -they either start or grow quickly to employ -they have developed org. structure
which of the following statements are true about robber barons?
-took advantage of economies of scale -dominated industrial sectors -responsible for some great abuses in business
considered a benefit but not mandated by law
-unemployment insurance
the U.S. government considers any business with fewer than ____...
500
an ______ that uses your education is a potential source of a business
Opportunity
Americans with disabilities Act applies fully to any business with more than
-15 employees also requires that there is no discrimination int eh hiring, management, or dismissal of employees
most important differences between a typical entrepreneurial start-up and a family business are
-Human Resources due to some of the employees being family members
Individual who is unsure of his business idea, plans to keep his business very small, or has minimal amount of cost and risk is more likely to select
-a sole proprietorship
requirements for a new business to obtain a city or county business license
-agree to report basic info -pay a set fee
two related entities that can help the new business owner force potential legal abilities are:
-board of directors -board of advisors
mechanic makes a mistake and causes a costly damage to a customer's car covers losses from employee embezzlement
-bonding insurance
if you prefer to work extensively with people, which should you NOT pursue a business opportunity?
-bookkeeping -billing
common examples of permits
-business licenses -OSHA food-handling -occupancy permits
occupational safety and health administration
-charged with protecting the health of workers -small firms with less than 10.. -it has tried to be more lenient -fines are lower
which are used to determine the capitalization rate?
-consistency of earnings -business risk -longevity of the business -quality of management
benefits of subchapter S corporation
-consolidation of business -legitimacy in the market as a more established form of business -limited liability for the owners -relatively easy to form compared with subchapter C
anti discrimination laws
-do not require business owners to hire any one particular person
examples of license and permit
-federal liquor license -business license -sign permit
which form of incorporation has recently become the most popular?
LLC
along with the business idea, what else should be included in the first column of the gap analysis chart?
a brief explanation of the business idea
along with properly financed and developing sustainable profit margins, in order to be successful entrepreneurs must:
develop an effective sales generation model
according to World bank, the presence of entrepreneurial small- and medium sized enterprises is one of the strongest factors....
gross national product
are very inexpensive to form...
limited liability corporations
process of forming and managing a new entrepreneurial business in a clear, sequential manner....
science
if a firms debts are less than $2 million, there is a fast track version of chapter 11 that gives creditors more control
false
a(n) _____ is a unique document that clearly lays out the crucial info about a new business idea and provides effective starting point....
one page pitch sheet
when preparing a business for sale, the business should examine its _____ to ensure the procedures of the business.....
operations
which account should be used when there is an expense too small to write a check for
petty cash register
___ include key suppliers, customers, and employees....
stakeholders
three key issues with starting a business include the funding of the firm, the creation of an accounting system and
the flow of info in the new business
typical categories used to analyze a business idea
-competitors -time -finance -risk -non financial resources
any buildings or equipment, even though not fully owned, would be considered a hard asset.
-false
common forms of debt for a new business
-CC card -supplier credit -loans
once a list of skills, abilities, and interests has beed developed, the next step is to:
perform a gap analysis
which of the following support the rationale for starting a business idea generation process by analyzing the skill sets of the potential founders?
-pursuing opportunities without the requisite skill set wastes time -there are literally millions of opportunities -pursuing opportunities without the requisite skill set wastes money
A harvest plan may include:
-selling the business to another firm -participating in a public offering stock -selling it to a group of investors
excellent sources of information regarding regulatory requirements
-small business administration -chamber of commerce -small business assistance centers -local department of economic development
a corporation pays a tax on its profits: then those after tax profits are paid as dividends to the owners....
double taxation
Fortune 500 is published annually by fortune magazine and documents the 500 largest corporations by____
sales
workers comp laws require them to be the same in all states
-false
record keeping
-company should keep track of records in case someone alleges that the company discriminates -maintain a record of who responded and the job criteria -keep track of all advertisements that have been run
elements of human resources
-hiring employees -dealing with difficult employees -retaining employees
succession plans
-parents often wait too long before creating one -when the parent retires, let child run it -successor should be selected and the person prepared early
three basic types of legal business organization
-partnership -corporation -sole proprietorship
the most complex and expensive and covers a specific innovation since its expensive, should only be obtained if it contributes to the sustainable competitive advantage of the organization
-patent
which class of partner in a limited partnership is considered the manager of the firm and has unlimited liability for any debts or judgements against the firm
general
which is true of entrepreneurial firms?
the structure of management is designed to take advantage of the skills of the founder or founders of firm
which are provided by the economic gardening program in the United States?
-tax incentives -financing for the venture -support classes
which should be considered by an entrepreneur when analyzing the non financial resources category of a gap analysis for a new business?
-what unique skills will be required to run the business? -what unique capabilities provide the entrepreneur a competitive advantage?
the capitalization is something that can be looked up rather than a generally agreed upon number.
false
___ are uniquely positioned to provide a much needed honest perspective on your efforts toward creating a new business
family members
once a list of skills and abilities has been developed, the next step is to perform a ___ to examine the marketplace for an opportunity that exists between the demand for a product and the supply provided by firms in the market.
gap analysis
which steps are important to the development of a quality business idea?
-compare one's ability to fill the gaps with the opportunity available -list and evaluate one's personal skill sets -analyze the market and look for a gap or need being met effectively
which of the following need to be evaluated to provide potential investors with the critical info required....
-competitive advantage -cash flow -management team
a founder or founding team must have synergy:
-competitive advantage -skill set -understanding of an industry
critical issues of personal liability and the desire to limit exposure to the original equity investment led to the development of corporations. a corporation addresses both drawbacks by
-considering the business and the individual entities
which are forms of non equity capital to start a business?
-debt -grants
for tax purposes business must have
-employer identification number
banks traditionally have been a major source of funds for
-established firms
a subchapter C corporation has a BLANK that is equal to the par value times the number of shares distributed
-floor value
utility patent
-for a new process, machine, article of a manufacture, or composition matter
elements required when forming a subchapter C or subchapter S corporation
-general nature of business -location of corporate headquarters -names, addresses, and titles of all founders
equity investment
funds received by a business in exchange for a percentage ownership of the business
which is a principle cause of a new business failure?
Insufficient financial resources at founding
equity theory
argues that people judge how they are treated relative to how they see others being treated -employees need a clear understanding of how their comp works compared to peers -will accept that someone who has been with the company longer may earn more -judge the fairness their compensation
high net worth individuals who invest in businesses not as a business but as an individual are known as:
business angels
suppliers will generally provide ____ on both physical assets and the actual supplies purchased
credit
which is NOT true with regard to managing flow of data?
data measurement methods must be complex
disadvantage of asset leasing
-new business may spend more money for the equipment over time than if it had been bought the unit outright
equal pay act
-not to discriminate in pay to men and women who do the same job
affordable care act
-one of the biggest beneficiaries... -provides tax incentives for small entrepreneurial firms to encourage...
cash-based accounting system
-only the smallest businesses use this
likely to affect small business when an employee becomes a problem
-organization does not fully benefit from the unhappy employee -owner loses time dealing with the situation -problem may cause other employees to have problems
records and tracks time for hourly workers and salaried employees
-payroll
insurance obtained by an entrepreneurial business primarily covers the building, fixtures, and inventory in all the buildings
-property insurance
The United States Small business Administration was organized to:
-provide info at all levels of org. -provide assistance at all levels of management -aid, counsel, and protect the interests of small business
potential business angels
-high income executives -entrepreneurs who have cashed out -professionals such as doctors/lawyers -individuals with significant inheritances
when using the cash flow method, the entrepreneur will take the net cash flow figure generated for each year and _____ that cash flow back...
discount
it is much cheaper on a per-unit basis for Anheuser-Busch to produce large volumes of beer than it is for a small craft beer...
economies
if a firm needs to generate cash in the short run, accounts receivable can be sold at a discount via a technique known as ____.
factoring