OLS 274 Exam 2 Chapters 5 & 6

The ________ industry represents the greatest percentage of minority-owned businesses. a. Service b. Retail c. Transportation d. Finance

Service

___________ use their own capital supplemented with government loans to invest in small businesses. a. Franchisors b. Joint ventures c. Small Business Investment Companies (SBICs) d. Microloans

Small Business Investment Companies (SBICs)

Small businesses produce over 16 times more patents than large businesses each year. T/F

True

Social entrepreneurs recognize a societal problem and use business principles to develop innovative solutions. T/F

True

Students who graduate from entrepreneurship programs are more likely to be self-employed. T/F

True

Tata Motors' purchase of Jaguar is an example of a horizontal merger. T/F

True

The average amount rewarded to owners of small businesses through Small Business Administration (SBA) microloans is $13,000. T/F

True

The set-aside program designates that a percentage of government contracts must be awarded to qualifying small businesses. T/F

True

Twenty-first century innovations developed by small businesses include social networking sites and green energy industries. T/F

True

Corporations have all of the following advantages EXCEPT ________. a. favorable tax treatment b. limited liability c. unlimited life d. expanded financial capacity

favorable tax treatment

Anita established a corporation in Nebraska, but she recently moved to Colorado where she now conducts her business. What type of corporation does Anita own? a. national corporation b. alien corporation c. domestic corporation d. foreign corporation

foreign corporation

Many businesses fail during the early years because of ________. a. unmotivated owners b. poor planning c. niche marketers d. inadequate financing

inadequate financing

The primary reasons people become entrepreneurs include all of the following reasons EXCEPT: a. to create employment opportunities for other people. b. to be one's own boss. c. to become a financial success. d. to create one's own job security.

to create employment opportunities for other people.

Owning a business, by definition, means that you are an entrepreneur. T/F

False

Small businesses are not required to pay any taxes. T/F

False

Sole proprietorships are concentrated mainly in corporations. T/F

False

The maximum number of shareholders is limited to ________ for a firm to qualify as a subchapter S corporation. a. 25 b. 75 c. 50 d. 100

100

What percent of U.S. companies are considered small businesses? a. 15% b. 25% c. 50% d. 99.7%

99.7%

The Hewlett Packard purchase of Compaq is an example of a conglomerate merger. T/F

False

Which of the following persons is LEAST likely to become an entrepreneur? a. A calm, low-energy person b. An intelligent person c. A flexible person d. An inquisitive person

A calm, low-energy person

James is putting together a business plan for his new bookstore and café. Which of the following will NOT be part of his business plan? a. An outline of what makes the company unique b. An detailed, itemized budget for the entire fiscal year c. An executive summary that covers the who, what, where, why, when, and how of the business d. An overview of prospective customers that identifies their needs

An detailed, itemized budget for the entire fiscal year

Devon and Keith opened a restaurant as a partnership. Two years later, Keith left the restaurant, and Devon discovered that Keith had charged numerous expenses to their account. These expenses resulted in thousands of dollars' worth of debt for the restaurant. What option does Devon have in this situation? a. He doesn't have to worry because, according to law, everyone is responsible for his/her own debts. b. Business creditors will pursue Keith alone since his signature authorized payments. c. Business creditors will expect full payment from Devon. d. Business creditors will expect Devon to pay at least half the debt since he owns 50 percent of the business.

Business creditors will expect full payment from Devon.

___________ must verify in writing the accuracy of their corporation's financial statements. a. CEOs and CFOs b. stockholders c. government officials d. board members

CEOs and CFOs

Most of the small businesses today are run by Caucasian males. T/F

False

Most small businesses turn a profit within the first year T/F

False

A corporation operating outside its state of incorporation is known as a domestic corporation. T/F

False

Entrepreneurs enjoy guaranteed job security because no one can fire them. T/F

False

Joint ventures are not ideal for international companies due to logistics and conflicting business laws. T/F

False

When the Small Business Administration (SBA) assists a small business in applying for a major loan, it acts as the lender's ________. a. Bank b. savings and loan association c. Guarantor d. credit union

Guarantor

Angie wants to be her own boss, but she doesn't have an idea for a profitable business. What could Angie do to help her identify a successful business idea? a. Identify the most popular companies in her area and create a replica business b. Pick an industry that is not experiencing a lot of change c. Ask her friends and family for suggestions d. Make a list of her interests and abilities and a list of businesses that match these interests and abilities

Make a list of her interests and abilities and a list of businesses that match these interests and abilities

Concerning education and entrepreneurs, all of the following statements are correct EXCEPT: a. Some colleges and universities sponsor business plan contests. b. Obtaining a college degree in entrepreneurship is essential before starting your own business. c. Some colleges and universities offer entrepreneurship courses outside the usual business curriculum. d. Hundreds of colleges and universities offer classes in entrepreneurship.

Obtaining a college degree in entrepreneurship is essential before starting your own business.

All of the following are contributions of small businesses EXCEPT: a. They fuel local economies. b. They provide more job security than large corporations. c. They provide needed services to the larger corporate community. d. They create a substantial number of new jobs.

They provide more job security than large corporations.

Desire for improved quality of life is often a motivation for becoming an entrepreneur. T/F

True

Entrepreneurial environments created within companies can help firms retain valuable employees who might otherwise leave to start their own businesses. T/F

True

For small businesses, establishing a Website is generally cheaper than opening up a retail store. T/F

True

High start-up expenses sometimes prove to be challenging for owners of small businesses. T/F

True

Horizontal mergers are popular in the auto and healthcare industries. T/F

True

Many entrepreneurs rely on personal savings or loans from business associates, family members, or even friends for start-up funds. T/F

True

Many small businesses prove successful when they become suppliers to large corporations. T/F

True

Most owners of small businesses rely on loans from financial institutions for their start-up funds. T/F

True

Obtaining financing for an existing business is easier than it is for most start-up companies. T/F

True

Michael is a successful financial advisor looking to invest money directly into a new consulting business in return for equity in the company. Michael is an example of a(n) ________. a. angel investor b. aerial entrepreneur c. entrepreneur d. intrepreneur

angel investor

The Small Business Administration (SBA) provides all of the following EXCEPT: a. access to venture capitalists b. business incubators c. advice from retired executives d. loan guarantees

business incubators

The ________ is most likely an example of public ownership. a. trucking company b. television company c. movie theater d. city sewer system

city sewer system

Franz and Arlene had an idea for a different type of ice cream. They struggled to open their own small business, and later, to expand production and distribution. Their products are distributed nationwide and their sales continue to increase. Franz and Arlene are examples of ________. a. classic entrepreneurs b. social entrepreneurs c. change agents d. serial entrepreneurs

classic entrepreneurs

According to surveys, the largest lenders to small businesses are ________ . a. family members b. commercial banks c. investors d. credit card companies

commercial banks

Isabella owns 100 shares of IBM ________ stock, which means she has voting rights on company decisions at IBM, but only residual claims on the company's assets. a. common b. pricipal c. management d. preferred

common

Assume that Microsoft decides to invest some of its excess cash by acquiring fellow Seattle-based Starbucks Coffee. This would be a ________. a. horizontal merger b. joint venture c. vertical merger d. conglomerate merger

conglomerate merger

Ben is the owner of a small mushroom farm in Pennsylvania. Ben would like to join with other growers to create an organization that will promote and distribute mushrooms. The form of ownership that would be most suited for the growers is the ________. a. cooperative b. government-owned collective c. joint venture d. open corporation

cooperative

Kayla is opening a home health care business that she knows will do well in her community based on prior research. Although she must repay borrowed funds, Kayla chooses to maintain complete control over the business without having to answer to investors or partners. a. equity financing b. venture financing c. debt financing d. sole proprietor financing

debt financing

The stock of Old Germany Brewery is totally owned by the Prechter family. When the family elected to move from a sole proprietorship to a corporation, the greatest concern was ________. a. choosing work assignments b. double taxation c. how to limit liability d. there might be family squabbles

double taxation

Dina is a single mother who is required to work evenings and weekends at a local retail store. She is thinking of starting a consulting business primarily so she can ________. a. increase her job security b. enjoy a higher quality of life c. guarantee her financial success d. become her own boss

enjoy a higher quality of life

Information technology can help entrepreneurs in all of the following ways EXCEPT: a. ensure financial success. b. project a professional image. c. work quickly and efficiently. d. provide improved customer service.

ensure financial success.

Jada is opening her own bakery. Jada is an example of a(n) ________. a. entrepreneur b. venture capitalist c. minority executive d. manager

entrepreneur

Small-business owners want to determine whether their companies meet the standards for small-business designation because: a. they do not have to pay taxes on their profits. b. government agencies offer benefits designed to help small businesses compete with larger firms. c. incorporation is easier for them. d. banks are more likely to grant them loans.

government agencies offer benefits designed to help small businesses compete with larger firms.

All of the following are duties of the board of directors of a corporation EXCEPT ________. a. hiring the corporation's chief executive officer b. guaranteeing the payment of cash dividends every year c. authorizing major transactions of the corporation d. electing its own officers

guaranteeing the payment of cash dividends every year

The joining of Chemical Bank and Chase Manhattan Bank was an example of a ________. a. conglomerate merger b. horizontal merger c. joint venture d. vertical merger

horizontal merger

United Airlines' purchase of Continental Airlines combines the resources and capabilities of both firms to create the world's largest airline. The newly formed company is an example of a _____________. a. horizontal merger b. joint venture c. vertical merger d. conglomerate merger

horizontal merger

Which type of merger results in decreased competition within the same industry? a. conglomerate merger b. vertical merger c. joint venture d. horizontal merger

horizontal merger

Logan is an entrepreneur who takes personal responsibility for the success or failure of his actions rather than believing in luck or fate. Which characteristic best describes Logan's entrepreneurial philosophy? a. need to achieve b. tolerance for failure c. internal locus of control d. tolerance for ambiguity

internal locus of control

In 2009, Walmart started working together with another company in India by forming a __________ with Bharti Enterprises, Inc., one of India's leading business groups. a. joint venture b. horizontal merger c. subsidiary d. vertical merger

joint venture

Entrepreneurs possess all of the following traits EXCEPT ________. a. low self-confidence b. vision c. tolerance for ambiguity d. creativity

low self-confidence

Elian wants to start a business. He takes a personality test and discovers he possesses a trait that may reduce the likelihood he will succeed. Which of the following is that trait? a. vision b. internal locus of control c. creativity d. low tolerance for risk

low tolerance for risk

Which of the following is the leading cause of today's small business failures? a. no marketing plan b. management shortcomings c. poor products and/or services d. location

management shortcomings

An acquisition occurs when ________. a. two or more firms combine to form a single company b. one corporation owns 8 percent of the stock of another corporation c. one company purchases the property and assumes the obligations of another company d. owners of small companies band together to operate their businesses collectively

one company purchases the property and assumes the obligations of another company

After starting a web design company while still in college, Rodrigo sold the company after graduation. He then opened a computer repair shop; and most recently, he has started a marketing firm that specializes in social media. Rodrigo is an example of a(n): a. serial entrepreneur. b. lifestyle entrepreneur. c. classic entrepreneur. d. social entrepreneur.

serial entrepreneur

If business owners in a partnership wish to limit liability, they have the option to ________. a. pledge funds b. divide into sole proprietorships c. set up a limited partnership d. withhold funds

set up a limited partnership

Louis works as an artist for a major textile company and created an innovation for producing designs. The company will implement Louis's idea as part of its ________ strategy. a. skunkworks b. seed capital c. angel investment d. entrepreneurship

skunkworks

Although the average farm size has increased in recent years the majority of farmers operate as ________ businesses. a. partnerships b. government owned c. small d. large

small

________ are pioneers of innovations that benefit humanity. a. classic entrepreneurs b. social entrepreneurs c. atypical entrepreneurs d. change agents

social entrepreneurs

Alexander has just opened a bakery & café in a busy New York City neighborhood. He has received an SBA-guaranteed microloan of $13,000. Alexander can use the microloan for all of the following, EXCEPT: a. to pay for a new advertising campaign b. to pay rent and utility bills for the building c. to pay off outstanding business-related credit card bills d. to buy a new dough mixer

to pay off outstanding business-related credit card bills

Lucia is a chief financial officer in a large corporation. Her responsibilities include the full financial authority to make appropriations and authorize expenditures. Lucia is likely to be a member of ________ management. a. supervisory b. top c. advisory d. middle

top

Owners of small businesses can increase their chances of success if they: a. hire only family members or friends. b. understand their own limitations. c. incorporate their business. d. become an expert in legal, financial, marketing, and other related business areas.

understand their own limitations.

Sole proprietorships have all of the following advantages EXCEPT ________. a. ease of formation b. unlimited life c. profits subject only to a single tax d. ease of liquidation

unlimited life

If Smith Steel buys Kennedy Iron Ore to assure itself of a constant flow of ore, this is an example of a ________. a. subsidiary corporation b. vertical merger c. domestic company d. conglomerate company

vertical merger