Test 3: Chapters 5, 6, 7, 8, & 9

Small businesses create about __________ percent of the new jobs in the United States.

65

Which of the following is an advantage of a partnership?

Shared management and pooled skills

The board of directors for a corporation is elected by its:

stockholders

Although successful entrepreneurs are more tolerant of uncertainty,

they strive to take calculated risks.

Kristen and her brothers and sisters decided to form a partnership that specializes in home design of all types. One of their goals is to maintain the loving relationship they currently enjoy, so they are following the Model Business Corporation Act recommendations as they write the partnership agreement. Which of the following is an accurate recommendation of the Act? A. The business should be actively operating for an extended period before the partners decide who is responsible for what business functions. B. Family businesses never take on outside partners, so no discussion of this need take place. C. There should be discussion and well-understood ways that the partners will handle disagreements. D. Due to the fact that they are all under 40 years old and expect to work until they are 65 there is no need to decide what will happen to the partnership if one decides to leave the business or retire, or dies.

A.

Compared to a sole proprietorship, which of the following is considered an advantage of a general partnership?

Ability to pool financial resources

Which of the following is a characteristic of successful entrepreneurs?

Action-oriented

____________ are private individuals who invest their own money in potentially hot new companies before these firms become larger, publicly traded companies.

Angel investors

______________ comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

Corporations

A conglomerate merger will:

Diversify business operations and investments.

Which of the following is normally considered a disadvantage of the corporate form of business?

Double taxation of earnings

Which of the following suggestions would an experienced business owner offer to help someone who is thinking about starting a business venture?

Gain experience by working for a successful businessperson.

______________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Limited liability companies

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Limited liability of owners

Which of the following explains why individuals accept the risks of business ownership?

The sense of self-satisfaction and independence.

Unlimited liability means

When you own your own business you are responsible for all the business debts.

One reason franchises have become so popular is that this arrangement provides the franchisee with:

a nationally recognized name and product.

Entrepreneurship is:

accepting the risk of starting and running a business.

A(n) ______________ occurs when one company buys the property and obligations of another company.

acquisition

Yesterday, on Facebook, one of Sarah's friends suggested that she spread the word about Mia Bella Boutique, an online company that designs hats and shoes. If Sarah's efforts generate 25 more people to spread the word, Sarah will receive 30% off her order. Mia Bella is utilizing ______________ , an effective strategy for increasing awareness and market share for web-based businesses.

affiliate marketing

One reason we have seen continued growth in home-based businesses is:

affordable technology makes it easier to compete.

The business plan will include ________.

an analysis of the competition

A major advantage of S corporations is that they:

avoid the problem of double taxation associated with conventional corporations.

Successful entrepreneurs are self-nurturing. This means they:

believe in themselves and their ideas.

Successful entrepreneurial teams:

bring a variety of talent to the business venture.

A ___________ is a written document that details the business idea, the target market and the business's competitive advantage, financial resources available for the business, and the qualification of the management.

business plan

A detailed written statement that describes the nature of the business, the target market, the firm's competitive advantages, as well as the owner's resources and qualifications is a:

business plan

For a prospective entrepreneurs, enrolling in an introduction to business or small business management course offered through their community college:

can be helpful by offering them an opportunity to meet experienced small business owners.

One reason limited liability companies have become so popular is that they:

can be taxed either as a corporation or as a partnership, so owners can choose the tax treatment that is most advantageous for their situation.

Erin developed a new type of exercise equipment she calls the Tush N' Tone. After unsuccessfully searching for potential investors, she arranged a personal loan and borrowed additional money from her parents. Her willingness to continue believing in her idea and to remain enthusiastic shows that Erin is: A. characteristically self-nurturing. B. better suited to managing a nonprofit organization. C. unaware of the risks she was taking. D. not a true entrepreneur.

characteristically self-nurturing

Juan recently completed 20 years of service in the Army. During this time, he managed to save a little money and is entitled to a government pension. His goal is to go back to his home state of Colorado and start a business making small, solar powered panels for residential use. Although he knows he needs a storefront and manufacturing site, he is not 100% convinced about where to locate. He knows for certain that one of his top priorities is to limit his tax liability associated with this new business. Your suggestion for Juan is:

check out the enterprise zones in Colorado.

When two companies in completely unrelated industries agree to become one firm, the result is called a:

conglomerate merger

Randy and Mandy plan to pool their money and musical talents to form a general partnership and begin booking weekend gigs. One of the first things Randy and Mandy should do is:

consult an attorney and put their agreement in writing.

A(n) ______________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

conventional corporation

A _____________ is an organization that is owned and controlled by the people who use it - producers, consumers, and workers with similar needs pool their resources for mutual gain.

cooperative

In rural areas electrical power is often sold by ___________ that take advantage of the government's policy to sell them electricity at wholesale rates.

cooperatives

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails. One way for Tess and Tijuana to avoid this risk would be to organize their firm as a(n):

corporation

The form of business ownership that usually requires the most detailed record keeping is the:

corporation

Entrepreneurs seeking financial support from bankers and potential investors should

create a detailed business plan to help the bankers and investors understand why this business will succeed.

Effective entrepreneurial teams combine:

creativity with marketing and production experience.

Small businesses:

deal with similar management issues that large companies face.

The goal of an intrapreneur is:

develop new products and generate new profits for the corporation.

Kyra recently quit a job with a large corporation to start her own business. While she realizes that her decision comes with risk, she is excited at the chance to be independent and by the challenges of running her own firm. Kyra is an example of a(n): A. intrapreneur. B. entrepreneur. C. venture capitalist. D. raconteur.

entrepreneur

A(n) __________ is a group of experienced professionals from different areas of business who join together to develop, make, and market a new product.

entrepreneurial team

An entrepreneurial team consists of:

experienced professionals from different areas of business.

A(n) _________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

franchise agreement

After personal savings, the next largest source of capital for entrepreneurs is from:

friends and family

In a partnership, a(n) ____________ partner (owner) actively manages the company and has unlimited liability for claims against the firm.

general

Enterprise zones and investor visas are examples of:

government programs that encourage economic growth through entrepreneurship.

Kristen and her brothers and sisters set up a design firm called Houses by Design LLP. Although key business functions are centralized, each sibling is a licensed architect that designs, builds, and installs residential and commercial buildings for his/her own clients. Unfortunately, a design created and installed for one of their clients resulted in water damage to the basement of the client's new home. The limited liability partnership:

guarantees that only those partners who were directly involved in designing and building this home face unlimited liability for claims against the firm.

When two companies in the same industry agree to become one firm, the result is called a:

horizontal merger

State and city governments have promoted facilities where new businesses can open up shop and share common services such as secretarial, accounting, and legal services. Due to their remarkable success rate, _______________ continue to grow in popularity.

incubators

A creative person working within a corporation to launch new products and generate new profits is known as a(n):

intrapreneur.

Jake is an innovative engineering graduate who works for a large company that makes adhesive products for commercial and consumer use. One of his primary responsibilities is to initiate and develop new products to complement the firm's current product line. Jake's company is ___________. A. intrapreneurial B. entrepreneurial C. an outside consultant for other firms D. at a disadvantage because it is trying to operate like a small business

intrapreneurial

A distinguishing feature of a cooperative is that it:

is owned and operated by the people who use it.

One of the challenges of running a home-based business is:

keeping work and family tasks separate.

When starting a small business, it's important to remember:

learning from others and gaining relevant business experience improves the odds for success.

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a

leveraged buyout

A partner (owner) who invests money in a business, does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

limited partner

In a limited liability partnership, each partner's risk of losing personal assets is:

limited to losses that result from his/her own acts and omissions and the acts and omissions of those who work under his/her supervision.

A type of partnership called a _________ acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

master limited partnership

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

master limited partnership

According to SBA guidelines, a manufacturing firm with 1,000 employees:

may be classified as a small business depending upon the size of other firms in the industry.

A ____________ is two firms combining to form one company.

merger

Pete inherited a thriving dry cleaning business from his father and mother. He continued the tradition of offering quality service to the customers he served. As the surrounding towns expanded, several people suggested that Pete expand the business to offer service in new locations. He chose to maintain only one operation, so as not to lose control and to keep his work life and home life balanced. Pete is a good example of a(n) ______________.

micropreneur

Southwest College received a government grant to establish a business incubator. This facility will offer: A. local government agencies assistance in obtaining funds for urban renewal. B. area businesses advice on employee benefits and ways to reduce taxes. C. venture capitalists an opportunity to identify new entrepreneurs. D. new businesses low-cost office space with basic business services.

new businesses low-cost office space with basic business services.

Maya plans to open a shop specializing in foods and cultural items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. Apparently Maya wants to:

obtain a strong financial base for the firm while maintaining personal control over the firm's management.

Jim is one of several general partners who own Beef 'N Beer, a small chain of restaurants located in Missouri and Illinois. Jim is interested in converting the partnership into a master limited partnership. If he convinces other partners to go along with his idea, Beef 'N Beer will:

offer shares of ownership that are traded on a stock exchange much like a corporation.

Business incubators are usually government-funded facilities intended to:

offer start-up firms low-cost office space and basic business services.

Compared to the C-corporation, the limited liability company is an attractive form of business ownership because:

once formed, the limited liability company does not require the firm to hold annual meetings, and has the option to avoid double taxation.

A significant disadvantage of owning a sole proprietorship is the

overwhelming time commitment often required of the owner.

Two key management functions that need particular attention when starting a business are

planning and financing

When entering into a new partnership, a good strategy is to:

put the partnership agreement in writing.

The most popular type of business for franchising is:

restaurants

As a young boy, Drew remembers his grandfather telling him, "Son, if you can find something you like to do, and somebody is willing to pay you to do it, well, that's the secret to a great life." The way Drew saw it, this was his big break. For the past five years, he split his time between school and working for a local tree farm/nursery business. The owner recently announced he was ready to retire. As Drew began creating a business plan, he contemplated what the business might be worth. How much will he need to buy this business? For starters, Drew:

should speak with the current owner and determine the total value of assets (what the business owns), its earning potential, and its unique advantage.

Due to the credit crunch during the recent recession, many small businesses found that __________ were more willing to lend money to smaller operations.

smaller, community banks

A ___________ is a form of business that is owned, and usually managed, by one person.

sole proprietorship

The _________ is usually the easiest form of business to start and end.

sole proprietorship

Enterprise zones are:

specific locations across the U.S. where entrepreneurs can set-up shop and receive tax breaks for operating in these areas.

An owner of a corporation is known as a(n):

stockholder

As a result of corporate downsizing, Alex lost his job as an information systems manager for a large telecommunications company. A bonafide computer geek in his own right, Alex knew that several of his past company contacts often outsourced their computer problems. He decided it was a good time to test the waters and see if he could secure enough computer clients to be in business for himself. His success demonstrated that:

successful big businesses often create profitable opportunities for small businesses.

If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves, this is referred to as:

taking the firm private.

A master limited partnership (MLP) is:

taxed like a partnership.

The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond:

the amount they have invested in the company.

To many businesspeople, one of the major attractions of a sole proprietorship is:

the chance to be their own boss.

Marco is a franchisee with Daggies, a chain of sandwich shops. His business was doing well until several Daggies franchisees got in trouble and were forced to close their shops. Soon afterward, Marco's business deteriorated and he too was forced to close. This is an example of:

the coattail effect

Anna recently left a large insurance firm and opened a home-based business preparing medical transcriptions for doctors. Based on recent statistics, she can expect: A. a negative reaction from friends and family who wonder when she will get a real job. B. the emergence of affordable technology will make it less challenging for her to compete with larger firms offering the same service. C. the government will discourage her attempts to create a home-based business in the hopes that she will opt for locating in an enterprise zone. D. to find security, routine and a paycheck from her new enterprise.

the emergence of affordable technology will make it less challenging for her to compete with larger firms offering the same service.

Bankers and potential investors are likely to read ___________ first.

the executive summary

Entrepreneurs looking for a business that gives them the best opportunity to get rich should consider starting a business in

the manufacturing sector.

After several years of working as a regional manager for a nationally known nonprofit, Janelle landed a management position with an innovative small business. If she accepts the job offer, she is likely to find that:

the principles of management are much the same at large and small firms.

Any debts or damages incurred by a firm organized as a sole proprietorship are:

the responsibility of the owner.

Dr. Smiley White just graduated from dental school. He is hoping to acquire the necessary funding to start his own dental practice. One advantage of this type of business is:

the service is individualized and not easily mass-produced.

Intrapreneurs make use of __________ to develop and launch new products and generate new profits.

their employer's existing human, financial, and physical resources.

One reason that companies participate in mergers and acquisition is:

to expand within their own field or enter new markets.

One of the major disadvantages of a sole proprietorship is the:

unlimited liability the owner has for the debts of the firm.

Successful small business owners are:

valuable sources for information since you can learn from their experiences.

A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a:

venture capitalist

A ________ merger unites firms at different stages of related businesses.

vertical

Three types of corporate mergers are:

vertical, horizontal, conglomerate

Keaton is an intrapreneur for a multinational electronics company. As an intrapreneur Keaton: A. is expected to recruit new managerial talent for his firm. B. will use the firm's existing resources to develop new products. C. is concerned mainly with improving the firm's public image. D. will concentrate on creating new ventures that can be spun off to become independent firms.

will use the firm's existing resources to develop new products.