ENT4900 CHAPTER 8 MIDTERM

"Be a good corporate citizen, and give back" represents which type of responsibility?

Discretionary

Explain the common legal forms of organization used by small businesses.

- The most basic legal forms of organization used by small businesses are the sole proprietorship, partnership, and C corporation. - In a sole proprietorship, the owner receives all profits and bears all losses. The principal disadvantage of this form is the owner's unlimited liability. - In a partnership, which should be established on the basis of a written partnership agreement, success depends on the partners' ability to build and maintain an effective working relationship. The partners share unlimited liability. - C corporations are particularly attractive because of their limited liability feature. The fact that ownership is easily transferable makes them well suited for combining the capital of numerous owners. - Currently, 63.9 percent of all new businesses are organized as sole proprietorships, 8.9 percent are set up as partnerships, and 7 percent are established as C corporations.

Existing competitive firms should be ignored in building a formal marketing plan.

False

Which of the following is NOT information contained in a disclosure document?

Franchisor's selling price

Small firms represent about___________ percent of all US exporters

97

coporation

A business organization that exists as a legal entity and provides limited liability to its owners

B corporation

A business organization that exists as a legal entity and provides limited liability to its owners.

stock certificate

A document specifying the number of shares owned by a stockholder

stock certificate

A document specifying the number of shares owned by a stockholder.

limited liability company

A form of organization in which owners have limited liability but pay personal income taxes on business profits.

limited partners

A partner in a limited partnership who is not active in its management and has limited personal liability.

piercing the corporate veil

A situation in which the courts conclude that incorporation has been used to perpetuate a fraud, skirt a law, or commit some wrongful act and remove liability protection from the corporate entity.

piercing the corporate veil

A situation in which the courts conclude that incorporation has been used to perpetuate a fraud, skirt a law, or commit some wrongful act and thus remove liability protection from the corporate entity

S corporation (Subchapter S corporation)

A type of corporation that offers limited liability to its owners and passes taxable income or losses on to stockholders.

S corporation, or Subchapter S corporation

A type of corporation that offers limited liability to its owners and passes taxable income or losses on to stockholders.

According to Gerber, all of the following are personalities that come into play when you are starting a business EXCEPT:

Administrative Personality

social network

An interconnected system of relationships with other people.

Entrepreneurs who receive an entire marketing and management system are participating in:

Business format franchising

In accounting, transactions are reported when they actually occur.

Cash- basis

Which of these is not a motivation for founding a company?

Community satisfaction

What is the first step in the marketing research procedure ?

Correctly identifying and defining the informational need

Which of these represent the second step in the ethical decision making process?

Identify alternative solutions

Which of the following is generally NOT an outcome when a business practices social responsibility?

Increased scrutiny from regulatory agencies

________ refers to a general sense of honesty and reliability that is expressed in a strong commitment to doing the right thing, regardless of the circumstances.

Integrity

Which statement s true about the startup rate for new businesses owned by women?

It has grown at a rate about 1.5 the national average

A(n) _______ is the most common form of organization for a new small business.

LLC

unlimited liability

Liability on the part of an owner that extends beyond the owner's investment in the business.

management team

Managers and other key persons who give a company its general direction Consists of individuals with supervisory responsibilities, as well as nonsupervisory personnel who play key roles in the business.

________ refers to startup ideas centered around providing customers with an existing product or service not available in their market.

New Market Ideas

an ____ business is a venture that is operated by a founding entrepreneur.

Owner-managed

Which of the following is NOT true of a C corporation?

Owners can be personally liable for the company's debts.

A change in how we fundamentally see a situation is called a--

Paradigm shift

________ refers to fundamentally refocusing the startup as it unfolds or completely recreating it if the initial concept turns out to be seriously flawed, but already exists elsewhere.

Pivot

________ refers to fundamentally refocusing the startup as it unfolds or completely recreating it if the initial concept turns out to be seriously flawed. but already exists elsewhere. a. Core competencies b. Serendipity c. SWOT d. Pivot

Pivot

____________ projecting the company's sales, costs, and profits are usually contained in the financial plan.

Pro forma statements

A corporation is set up in order to accommodate individuals whose profession requires licensure.

Professional

What is the purpose of the Foreign Corrupt Practices Act?

Prohibit US firms from paying bribes in foreign countries, including countries where such bribes may be legal.

A/n *** model identifies the nature and types of income expected to come into the firm from the sale of products and services.

Revenue model

An assessment that provides a concise overview of a firm's strategic situation

SWOT analysis

SCORE stands for--

Service Corps of Retired Executives

If the children of teh founder become the owners and managers of the business, that second generation is referred to as a(n)--

Sibling partnership

which of the following is not a characteristic of a family council?

Small, selected group of employee's

A ___ is the web of relationships that person has with other people including roommates or other acquaintances from college, former employees and business associates, and contacts through community organizations.

Social network

Which of these refers to a company's ethical obligations to the community?

Social responsibility

social capital

The advantage created by an individual's connections in a social network

social capital

The advantage created by an individual's connections in a social network.

Which of the following is NOT an eligibility requirement for an S corporation?

The corporation must be international.

The Internet has made it easier for users to copy intellectual property.

True

LLC stands for

a. Limited Liability Company.

Having positive net profits in an income statement does not necessarily mean that a firm has generated positive cash flows. a. True b. False

a. True

A segmenting strategy that targets the mass market is called a(n)-- a. un-segmented strategy. b. multi-segmented strategy. c. single-segmented strategy. d. demographic strategy.

a. un-segmented strategy.

Fixed assets include all of the following EXCEPT: a. land. b. inventory. c. trucks. d. machinery

b. inventory.

Which of the following is not a distinct type of marketing philosophy

computer orientation

Which of the following e-commerce business models do not actually sell anything online? a. Information-based. b. Content-based. c. Transaction-based. d. A and B.

d. A and B.

Yongmei's company is the target of an acquisition by a larger company that will finance the deal primarily through taking on a large debt. This type of deal is called: a. A management buyout. b. A seller-financed buyout. c. An employee buyout. d. A leveraged buyout.

d. A leveraged buyout.

Segmenting a market by age, gender, or income uses ____________ variables for market segmentation.

demographic

Core competencies are the same thing as competitive advantage.

false

Core competencies are the same thing as competitive advantage. a. True b. False

false

Generally, investors are more product oriented than market oriented.

false

A ________ analysis is a preliminary assessment of a business idea that gauges whether or not the venture envisioned is likely to succeed

feasibility

A preliminary assessment of a business idea that gauges whether the venture envisioned is likely to succeed

feasibility analysis

Pro forma statements projecting the company's sales, costs, and profits are usually contained in the __________ plan.

financial

Those organizational resources that are invisible and difficult to assess

intangible resources

Using the textbook's criteria for defining a small business, a new venture isn't a small business if it:

is engaged in geographically dispersed operations

A specific group of customers with an identifiable but narrow range of product or service interests refers to:

niche market

Under the restrictions of __________, the buyer promises the seller that he or she will not reveal confidential information or violate the trust that the seller has offered in providing the information.

nondisclosure agreement

The___________ plan offers information on how the product will be produced or the service provided.

operations and development

the managerial and professional talent of a new venture venture management team can be supplemented by using ______ assistance.

outside

Which section of the marketing plan should describe the entrepreneur's approach to creating customer awareness of the product or service and explain why customers will be motivated to buy?

promotion

A form of the business plan that presents the most important issues and projections of the business is called the--

short plan

One unethical practice involves the concealing of business income. This practice is called is called:

skimming

SWOT stands for:

strengths, weaknesses, options, and trade.

When ABC International engages in the unethical practice of concealing business income, it is called skimming

true

A segmenting strategy that targets the mass market is called a(n)--

un-segmented strategy

Describe the characteristics and value of a strong management team.

- A strong management team nurtures a good business idea and helps provide the necessary resources to make it succeed. - The skills of management team members should complement each other, forming an optimal combination of education and experience. - A small firm can enhance its management by drawing on the expertise of competent insiders and outside specialists. - Social media tools can be very helpful in attracting customers, connecting with peers, and sharing advice about common problems. - Building social capital through networking and goodwill is extremely helpful in developing a small business.

Discuss the unique features and restrictions of five specialized organizational forms.

- In a limited partnership, general partners have unlimited liability, while limited partners have only limited liability as long as they are not active in the firm's management. - S corporations, also called Subchapter S corporations, enjoy a special tax status that permits them to avoid the corporate tax but requires individual stockholders to pay personal taxes on their proportionate shares of the business profits. - In limited liability companies, individual owners have the advantage of limited liability but pay only personal income taxes on the firm's earnings. - Professional corporations are set up for those who offer professional services (usually those that require a license), to protect them from the liability of other owners in the practice. - Some enterprises (especially those with a social focus) benefit from greater credibility and authenticity when they organize as nonprofit corporations, such as 501(c)(3) organizations. - The B corporation may be the best form of organization for entrepreneurs who are intending to use the power of business to solve a social or environmental problem.

Understand the nature of strategic alliances and their uses in small businesses.

- Strategic alliances allow business firms to combine their resources without compromising their independent legal status. - Strategic alliances may be formed by two or more independent businesses to achieve some common purpose. For example, a large corporation and a small business or two or more small businesses may collaborate on a joint project. - Entrepreneurs can improve their chances of creating and maintaining a successful alliance by establishing productive connections, identifying the best person to contact, being prepared to confirm the long-term benefits of the alliance, learning to speak the partner's "language," ensuring a win-win arrangement, and monitoring the progress of the alliance and making any necessary changes.

Identify factors to consider in choosing among the primary legal forms of organization.

- The key factors in choosing an organizational form are initial organizational requirements and costs, liability of the owners, continuity of the business, transferability of ownership, management control, attractiveness for raising capital, and income tax considerations. - Self-employed individuals who operate businesses as sole proprietorships report income from the businesses on their individual tax returns. - A partnership reports the income it earns to the Internal Revenue Service, but the partnership itself does not pay income taxes. The income is allocated to the owners according to their partnership agreement. - A C corporation reports its income and pays any taxes due to this corporate income. Individual stockholders must also pay personal income taxes on dividends paid to them by a corporation.-

Describe the effective use of boards of directors and advisory boards.

- To be most effective, a board of directors should include properly qualified, independent outsiders, who provide a good fit with the nature and needs of the business. - Boards of directors can assist small businesses by offering objective counsel and assistance to their chief executives. - Directors can fill gaps in the expertise of a management team and monitor its activities. - One alternative to an active board of directors is an advisory board, whose members are not personally liable for the company's actions.

Small business accounts for about what proportion of U.S. firms with employees?

99%

corporation

A business organization that exists as a legal entity and provides limited liability to its owners.

legal entity

A business organization that is recognized by the law as having a separate legal existence.

legal entity

A business organization that is recognized by the law as having a separate legal exsitence

sole proprietorship

A business owned by one person, who bears unlimited liability for the enterprise

sole proprietorship

A business owned by one person, who bears unlimited liability for the enterprise.

Which of the following is a characteristic of a family business?

A business that passes from one generation to the next

stock certificates

A document specifying the number of shares owned by a stockholder.

corporate charter

A document that establishes a corporation's existence

corporate charter

A document that establishes a corporation's existence.

partnership agreement

A document that states explicitly the rights and duties of partners

partnership agreement

A document that states explicitly the rights and duties of partners.

nonprofit corporation

A form of corporation for enterprises established to serve civic, educational, charitable, or religious purposes; not for generation of profits

nonprofit corporation

A form of corporation for enterprises established to serve civic, educational, charitable, or religious purposes; not for generation of profits.

professional corporation

A form of corporation that shields owners from liability and is set up for individuals in certain professional practices.

limited liability company

A form of organization in which owners have limited liability but pay personal income taxes on business profits

Limited Liability Company (LLC)

A form of organization in which owners have limited liability but pay personal income taxes on business profits.

advisory board

A group that serves as an alternative to a board of directors, acting only in an advisory capacity

advisory board

A group that serves as an alternative to a board of directors, acting only in an advisory capacity.

partnership

A legal entity formed by two or more co-owners to operate a business for profit.

partnership

A legal entity formed by two or more co-owners to operate business for profit

general partner

A partner in a limited partnership who has unlimited personal liability

general partner

A partner in a limited partnership who has unlimited personal liability.

limited partner

A partner in a limited partnership who is not active in its management and has limited personal liability

limited partnership

A partnership with at least one general partner and one or more limited partners

limited partnership

A partnership with at least one general partner and one or more limited partners.

reciprocation

A powerful sense of obligation to repay in kind what another has done for or provided to us.

S corporation (Subchapter S corporation)

A type of corporation that offers limited liability to its owners and passes taxable income or losses on to stockholders

social network

An interconnected system of relationships with other people The web of relationships that a person has with other people, including roommates or other acquaintances from college, former employees and business associates, and contacts through community organizations.

C corporation

An ordinary corporation, taxed by the federal government as a separate legal entity.

strategic alliance

An organizational relationship that links two or more independent business entities in a common endeavor

strategic alliance

An organizational relationship that links two or more independent business entities in a common endeavor.

The ________ is the governing body for corporate activity. a. board of consultants b. advisory council c. lead consultant d. board of directors

BOD Board of directors

Which of the following is not an advantage of family involvement in the business?

Children easily see the advantages derived from family participation in the business

A more in-depth business plan that provides an analysis of the critical factors that will determine the success or failure of the business is called a

Comprehensive plan

Which of the following is a consideration in the transfer of ownership in the family firm?

Consideration of tax laws

If an entrepreneur wanted to limit the liability of ownership, he/she should choose which of the following forms of organization? a. Corporation b. Sole proprietorship c. Partnership d. Limited partnership

Corporation

A ________ identifies the key demographic and psychological characteristics of the individuals you consider most likely to be qualified purchasers of your products and services

Customer profile

Which of the following is not a consideration in the transfer of ownership in the family firm?

Delay of transfer of ownership until death of the founder

A firm subscribing to a consumer-oriented philosophy of marketing believes the product is the most important part of the business.

False

According to Entrepreneur magazine's "Top Franchises for 2012," McDonald's is ranked number 1

False

Given the size, the ethical influence of a leader is more pronounced in a large corporation than it is in a small firm

False

One of the disadvantages of franchising is the inability on part of franchisees to use franchisor's trade name and trademark.

False

Research finds that, generally, the process of succession is usually very fast in a family business.

False

Research finds the due to lack of control, franchising is more risky than starting a business from scratch.

False

The basic features of the relationship between the franchisor and the franchisee are embodied in the broker contract

False

The general environment is defined more narrowly as the context for factors that directly impact a given firm and all of its competitors.

False

The internet has made it easier for people to steal the creations and ideas of others, including literary works, artistic products, and music. These creations are collectively known as trademarks.

False

The overlap of family concerns and business interest in the family firm simplifies management of the business.

False

Unlimited liability means that the owner's personal assets outside

False

Unlimited liability means that the owner's personal assets outside the business cannot be taken by creditors if the business fails. a. True b. False

False

a refugee is a person who tried entrepreneurship, failed and sought refuge in corporate employment

False

"Three big" stakeholders for organizations are employees, customers, and competitors.

False.

Microbusinesses are firms that provide substantial profits to their owners

False.

Unfortunately, a cost-based strategy usually doesn't work for small companies because they don't have the capacity to produce high volumes.

False.

a statement of principles intended to guide a family firm through times of crisis and change refers to a

Family business constitution

Members of the succeeding generation in family firms have emotional resistance to joining the firm which include all of the following EXCEPT:

Fear of Affluence

A popular tool for studying the industry environment is Porter's five factors. Which of the following is NOT considered part of the five factors?

Federal Government

All of the following are advantages that a limited liability company (LLC) has over an S corporation EXCEPT: a. LLCs can offer stock options to employees b. LLCs are more flexible c. LLCs are easier to set up d. LLCs have significant tax advantages

LLC's can offer stock options to employees

All of the following are advantages that a limited liability company (LLC) has over an S corporation EXCEPT:

LLCs can offer stock options to employees

unlimited liability

Liability on the part of an owner that extends beyond the owner's investment in the business

A microbusiness that permits the owner to follow a desired pattern of living refers to which of these

Lifestyle business

A ________ involves at least one general partner and one or more limited partners.

Limited Partnership

A involves at least one general partner and one or more limited partners.

Limited Partnership

LLc stands for

Limited liability company

management team

Managers and other key persons who give a company its general direction.

Which of the following is a reason small firms assume a consumer orientation?

Managers are concerned about long term survival

involves taking the steps necessary to locate and describe potential customers.

Market Analysis

Which of these may be defined as the gathering, processing, interpreting, and reporting of market info?

Market research

Entrepreneur's Top 10 Franchises for 2012 include all of these EXCEPT:

Starbucks

Michael Porter lists five factors that determine the nature and degree of competition in an industry. Which of his factors describes, "Can customers turn to other products or services to replace those that the industry offers?"

Substitute products and services

Which of the following is not a characteristic of a business plan?

Summarization of the operations of a mature business

An outside-in analysis involves assessing the firm's--

The general environment and industry environment

board of directors

The governing body of a corporation, elected by the stockholders.

board of directors

The government body of a corporation, elected by the stockholders

corporation

The liability of each partner resulting from any one partner's ability to legally bind the other partners.

joint and several liability

The liability of each partner resulting from any one partner's ability to legally bind the other partners.

oint and several liability

The liability of each partner resulting from any one partner's ability to legally bind the other partners.

joint and several liability

The liability of each partner resulting from any one partner's ability to legally bind the other partners. A business decision by one partner binds all other partners, even if they were not consulted in advance, didn't approve the agreement or contract in question, or didn't even know about it. In general partnership, each party bears _______.

preemptive right

The right of stockholders to buy new shares of stock before they are offered to the public

preemptive right

The right of stockholders to buy new shares of stock before they are offered to the public.

Which of the following is NOT a potential problem in the succession of a family business?

The type of business conducted by the firm

which of the following is a reason for buying an existing business?

To acquire an ongoing business at a bargain price

A franchise Disclosure Document (FDD) is a detailed statement of such information as the franchisor's finances, experience, size, and involvement in litigation.

True

An economically attractive and timely opportunity that creates value for interested buyers and end users refers to entrepreneurial opportunity.

True

In a family business, the founder's core values may become part of both the business culture and the family code.

True

New technology involves using high-tech technology to simulate real life experiences.

True

Pre-emptive rights allow stockholders to buy new shares of stock before they are offered to the public. a. True b. False

True

The death of an owner terminates the legal existence of a business that is organized as a sole proprietorship. a. True b. False

True

The death of an owner terminates the legal existence of a business that is organized as sole proprietorship.

True

The notion of intergrity and ethics are closely tied

True

a potential advantage of the husband-wife team (co-preneurs) is the opportunity to share more of their lives.

True

organizational test

Verification of whether a nonprofit organization is staying true to its stated purpose.

restrict and/or limit the operations of home-based businesses.

Zoning ordinances

The party in a franchise contract that specifies the methods to be followed and the terms to be met by the other party is called a

a franchisor

Entrepreneurs who receive an entire marketing and management system are participating in: a. Business format franchising b. Multiple-unit ownership c. Piggyback franchising d. Product and trade name advertising

a. Business format franchising

Which of the following is a consideration in the transfer of ownership in the family firm? a. Consideration of tax laws b. Fair treatment of community members c. Delay of transfer of ownership until the death of the founder d. Planning and discussion of taking the firm public

a. Consideration of tax laws

The most accurate statement concerning socially responsible actions and firm profitability is: a. Evidence concerning the link between social responsibility and profit is mixed. b. Firms that act in socially responsible ways nearly always make less profit. c. Firms that act in socially responsible ways nearly always make more profit. d. Profit should be sacrificed for the sake of being socially responsible.

a. Evidence concerning the link between social responsibility and profit is mixed.

Which of the following is NOT true of a C corporation? a. Owners can be personally liable for the company's debts. b. It is a legal entity separate from its owners. c. A corporate charter must be approved. d. Ownership is easily transferable.

a. Owners can be personally liable for the company's debts.

________ projecting the company's sales, costs, and profits are usually contained in the financial plan. a. Pro forma statements b. Industry statistics c. Management capabilities d. Marketing potential of the competition

a. Pro forma statements

Which of the following statements most accurately describes the relationship between planning and doing in a business? a. They are both important and must be balanced intelligently. b. It is better to act than think too much. c. The more detailed the plan, the better. d. Planners never get anything done.

a. They are both important and must be balanced intelligently.

A Franchise Disclosure Document (FDD) is a detailed statement of such information as the franchisor's finances, experience, size, and involvement in litigation. a. True b. False

a. True

A potential advantage of the husband-wife team (co-preneurs) is the opportunity to share more of their lives. a. True b. False

a. True

A profitable company does not necessarily have positive cash flows. a. True b. False

a. True

An example of a non-quantitative factor in buying a business is future community development. a. True b. False

a. True

One of the benefits of e-commerce is that it allows small businesses to compete on a more level playing field with large businesses. a. True b. False

a. True

The death of an owner terminates the legal existence of a business that is organized as a sole proprietorship. a. True b. False

a. True

Total assets less outstanding debt must always equal ownership equity. a. True b. False

a. True

Unfortunately, there is no formula for determining the price of a private company. a. True b. False

a. True

The ________ is the governing body for corporate activity. a. board of directors b. advisory council c. board of consultants d. lead consultant

a. board of directors

The four basic ways to harvest an investment in a privately owned company are all of these EXCEPT: a. buying another firm. b. distributing the cash flows generated by the business to its owners instead of reinvesting the cash. c. offering stock to the public through an initial public offering. d. undertaking a private equity recapitalization.

a. buying another firm.

The _______ is usually at the beginning of the business plan and summarizes the total plan. a. executive summary b. products and/or service plan c. marketing plan d. management plan

a. executive summary

The party in a franchise contract that specifies the methods to be followed and the terms to be met by the other party is called a(n)-- a. franchisor. b. franchisee. c. local community. d. broker.

a. franchisor.

Most investors are more __________ because they realize what it takes to make money. a. market-oriented b. people-oriented c. product-oriented d. quality-oriented

a. market-oriented

A pattern of behaviors and beliefs that characterize a particular firm refers to its-- a. organizational culture. b. family council. c. family-based commitment. d. nepotism.

a. organizational culture.

The managerial and professional talent of a new venture management team can be supplemented by using ________ assistance. a. outside b. in-house c. employee d. corporate

a. outside

A(n) _____ business is a venture that is operated by a founding entrepreneur. a. owner-managed b. sibling partnership c. cousin consortium d. family council

a. owner-managed

A profitable company that responds to customers' needs while showing reasonable concern for the environment is called a(n) a. sustainable small business. b. underlying valued business. c. better business bureau poster child. d. a socially coded business.

a. sustainable small business.

All of these elements must be evident from the feasibility analysis before you move on to the business plan EXCEPT:

agreeable banker

A limited partnership consists of--

at least one general partners and one or more limited partners

Which of the following is NOT a cost normally associated with franchise ownership? a. Initial franchise fee b. A personal vehicle c. Investment costs d. None of the above are costs normally associated with franchise ownership

b. A personal vehicle

_____ consist of payments due from a firm's customers. a. Accounts payable b. Accounts receivable c. Accrued expenses d. Inventory

b. Accounts receivable

Social entrepreneurship is best defined as: a. A more profitable and more ethical approach to founding a company. b. Applying already established principles of good business to social problems. c. Leveraging social media to build a customer base. d. A more enlightened way to do business.

b. Applying already established principles of good business to social problems

Harvesting is best described as: a. Picking the best parts of the business (those with the highest cash flow) and gutting the rest. b. Capturing value in the form of cash flows, reducing risks, and creating future options. c. Selling the business for cash. d. Buying all other owners out and gaining 100% control over the company.

b. Capturing value in the form of cash flows, reducing risks, and creating future options.

Which of the following marketing philosophies is likely to lead to success in many areas, not just marketing? a. Profit-oriented b. Consumer-oriented c. Sales-oriented d. Production-oriented

b. Consumer-oriented

If an entrepreneur wanted to limit the liability of ownership, he/she should choose which of the following forms of organization? a. Partnership b. Corporation c. Limited partnership d. Sole proprietorship

b. Corporation

Which of the following is NOT an advantage of opening a home-based business? a. It is often quicker and cheaper to get up and running. b. Customers feel more comfortable in your home. c. You will save time and money on daily commutes. d. You will be your own boss.

b. Customers feel more comfortable in your home.

"Three big" stakeholders for organizations are employees, customers, and competitors. a. True b. False

b. False

A business incubator produces ideas for new ventures. a. True b. False

b. False

Fortunately, an entrepreneur can cash out immediately after the completion of the IPO. a. True b. False

b. False

General-purpose equipment permits cost reduction in industries in which the technology is fully established and in which a capacity is assured by high sales volume. a. True b. False

b. False

Generally, investors are more product-oriented than market-oriented. a. True b. False

b. False

In a harvest strategy, financial questions associated with the sale of a firm include how to value the firm and how will this affect the firm's stock. a. True b. False

b. False

In industries in which the technology is fully established and a capacity operation is assured by high sales volume, retail store equipment can reduce costs. a. True b. False

b. False

Piercing the corporate veil" means a corporation has formed strategic alliances with other corporations.

b. False

Research finds that due to lack of control, franchising is more risky than starting a business from scratch. a. True b. False

b. False

The income statement and the cash flow statement complement each other to give an overall picture of the firm's financial situation. a. True b. False

b. False

Unlimited liability means that the owner's personal assets outside the business cannot be taken by creditors if the business fails. a. True b. False

b. False

When harvesting a firm, getting professional advice is helpful but not vital to the process. a. True b. False

b. False

Writing a business plan should be thought of as the means to an end. a. True b. False

b. False

Which of the following is NOT information contained in a disclosure document? a. Franchisor's financial statements b. Franchisor's selling price c. Franchisee's initial costs/fees d. Franchisor's involvement in litigation

b. Franchisor's selling price

Which of the following is generally NOT an outcome when a business practices social responsibility? a. Increased financial performance b. Increased scrutiny from regulatory agencies c. Greater access to capital d. Reduced employee turnover

b. Increased scrutiny from regulatory agencies turnover

Profits are not the same as cash flows because: a. They do not include the sale of stock. b. They are calculated on an accrual rather than a cash basis. c. They are reconciled with the bank statement. d. They are calculated yearly rather than monthly.

b. They are calculated on an accrual rather than a cash basis.

Market segmentation, marketing research, and sales forecasting are integral parts of what is commonly called-- a. marketing mixes. b. a marketing analysis. c. secondary data. d. a buildup process.

b. a marketing analysis.

The practice of employing relatives is referred to as-- a. a family council. b. nepotism. c. co-preneurs. d. a transfer of ownership.

b. nepotism.

The executive summary should include all of these subsections EXCEPT: a. an explanation of the business concept. b. products and/or service plan. c. an industry overview. d. a description of the opportunity.

b. products and/or service plan.

In direct forecasting, _______ is the forecasting variable. a. the surrogate variable b. sales c. the independent variable d. marketing

b. sales

A _____ is the web of relationships that a person has with other people, including roommates or other acquaintances from college, former employees and business associates, and contacts through community organizations. a. sole proprietorship b. social network c. social capital d. c-partnership

b. social network

According to Spinelli and Adams, desirable entrepreneurial characteristics are all of these EXCEPT

be a domineering manager.

The __ is the governing body for corporate activity.

board of directors

Doing more with less in terms of resources invested in business, and, where possible, controlling the resources without owning them refers to

bootstrapping

Small business can gain a competitive advantage through all of the following except

bootstrapping

All of the following are e-commerce business models EXCEPT? a. B2B b. B2C c. B2A d. Auction site

c. B2A

"Be a good corporate citizen, and give back" represents which type of responsibility? a. Ethical b. Economic c. Discretionary d. Legal

c. Discretionary

A good retirement plan for an entrepreneur: a. Pulls as much cash as possible from the growing business to invest in off-the-shelf investment instruments. b. Is just a distraction. The entrepreneur must focus exclusively on creating value in the company. c. Is diversified such that it includes both the harvest and other types of investments not tied to the company's success. d. Relies solely on the harvest of the business.

c. Is diversified such that it includes both the harvest and other types of investments not tied to the company's success.

Which of the following statements most accurately describes the financial liability of a corporate stockholder? a. Stock ownership releases the individual from all financial obligations of the firm. b. The purchase of stock alone implies an obligation for the stockholder to repay debts incurred by the firm. c. It is limited to the amount of money invested in the business unless the owner has signed personally for a corporate loan. d. It applies only to money invested in stock and never to the stockholder's personal assets.

c. It is limited to the amount of money invested in the business unless the owner has signed personally for a corporate loan.

All of the following are advantages that a limited liability company (LLC) has over an S corporation EXCEPT: a. LLCs are easier to set up b. LLCs are more flexible c. LLCs can offer stock options to employees d. LLCs have significant tax advantages

c. LLCs can offer stock options to employees

Which of the following is NOT a potential problem in the succession of a family business? a. Reluctant parents b. Ambitious children c. The type of business conducted by the firm d. Lack of understanding between parent and child

c. The type of business conducted by the firm

Family businesses are best described as: a. Businesses that cater to families. b. Companies that sell products and services appropriate for all ages. c. Those in which the strategic direction of the firm is influenced significantly by family members. d. Businesses that hire only family members.

c. Those in which the strategic direction of the firm is influenced significantly by family members.

Challenges in designing the physical facilities for a new business include finding all of the following EXCEPT: a. a space that is too small. b. a space that is too large. c. a space that is extravagant. d. a space that is practical.

c. a space that is extravagant.

A limited partnership consists of-- a. one general partner. b. all limited partners. c. at least one general partners and one or more limited partners. d. all general partners.

c. at least one general partners and one or more limited partners.

A limited partnership consists of-- a. one general partner. b. all limited partners. c. at least one general partners and one or more limited partners. d. all general partners.

c. at least one general partners and one or more limited partners.

A(n) ________ should be written as the last step in writing the business plan. a. financial plan b. operations and development plan c. executive summary d. exit strategy

c. executive summary

A statement of principles intended to guide a family firm through times of crisis and change refers to a(n)-- a. organizational culture. b. cousin consortium. c. family business constitution. d. transfer of ownership.

c. family business constitution.

A surrogate variable is used in_________ forecasting. a. break even b. direct c. indirect d. competition

c. indirect

When Subway operates a restaurant within a truck stop, it is an example of ____ franchising. a. business format b. multiple-unit ownership c. piggyback d. product and trade name

c. piggyback

Costs and break-even analyses are included in the ___________ section of the marketing plan. a. promotion b. distribution c. pricing d. product

c. pricing

ABC Financing provides a combination of debt and equity to the business that allows the entrepreneur to cash out part of his or her investment in the company. This refers to a-- a. bust-up LBO. b. built-up LBO. c. private equity recapitalization. d. ESOP.

c. private equity recapitalization.

Ethical _______ holds the philosophy "When in Rome, do as the Romans do". a. religion b. imperialism c. relativism d. codes of ethics

c. relativism

Ethical companies feel that they have an obligation to their _______, the people who could be affected by the company's actions. a. competitors b. governments c. stakeholders d. agents

c. stakeholders

A company's routines and processes that can coordinate the combined use of its productive assets in order to achieve desired outcomes

capabilities

_____refers to actions by franchisors to void the contracts of franchisees in order to sell the franchise to someone else and collect an additional fee.

churning

Which of these involves bringing two franchise brands together under one owner?

co-branding

A benefit that exists when a firm has a product or service that is seen by its target market as better than those of competitors

competitive advantage

The environment that focuses on the strength, position, and likely moves and countermoves of competitors in an industry

competitive environment

Those capabilities that provide a firm with a competitive edge and reflect its personality

core competencies

If an entrepreneur wanted to limit the liability of ownership, he/she should choose which of the following forms of organization?

corporation

A small firm that provides low prices due to cost efficiencies is using a--

cost based strategy

A small firm that provides low prices due to cost efficiencies is using a a. cost-based strategy. b. revenue-based strategy. c. focus strategy. d. differentiation-based strategy.

cost- based strategy

A plan of action that requires a firm to hold down its costs so that it can compete by charging lower prices and still make a profit

cost-based strategy

A formal organization in which family members discuss strategic planning and other issues pertaining to the family business called a family _____.

council

Which of these involves bringing two franchise brands together under one owner? a. Piggyback franchising b. Master licensee c. Elite entrepreneur d. Co-branding

d. Co-branding

Which of the following is NOT one of the "Big Three" stakeholders? a. Owners b. Customers c. Employees d. Government regulators

d. Government regulators

If you are asked to describe how will you entice customers to make the change to your product or service and to continue using it, which section of a business plan would you address it in? a. Financial b. Operations and development c. Management d. Marketing

d. Marketing

Which of these may be defined as the gathering, processing, interpreting, and reporting of market information? a. Customer profile b. Biography of customers c. Buildup process d. Marketing research

d. Marketing research

Which of the following is NOT an area of strategy the marketing plan should address? a. Promotion b. Distribution c. Pricing d. Production

d. Production

Entrepreneur's Top 10 Franchises for 2012 include all of these EXCEPT: a. Hampton Hotels b. Servpro c. Denny's, Inc. d. Starbucks

d. Starbucks

Which of the following is NOT one of the three main financial statements? a. Income Statement b. Cash Flow Statement c. Balance Sheet d. Statement of Changes in Owners' Equity

d. Statement of Changes in Owners' Equity

The fundamental benefit a customer gains from a product or service is called: a. The actual product/service. b. The virtual product/service. c. The augmented product/service. d. The core product/service.

d. The core product/service.

Recent research findings suggest that companies that are successful in making the transition from one generation to the next are: a. Those in which the culture keeps "creative" members in line. b. Those that instill a sense in succeeding generations that the founders' way of doing business is sacrosanct. c. Run by intricate operational guidelines that specify every detail of day-to-day work. d. Those whose new leaders act on their own, take risks, and support innovation.

d. Those whose new leaders act on their own, take risks, and support innovation.

Operating expenses consist of all of the following EXCEPT: a. marketing and selling expenses. b. general and administrative expenses. c. depreciation. d. cost per number of item sold.

d. cost per number of item sold.

Harvesting encompasses all of the following EXCEPT: a. creating future options. b. capturing value. c. reducing risk. d. expanding.

d. expanding.

Of all the relationships in a family business, the ______ relationship is the most sensitive and troublesome. a. husband-wife b. in-law c. son-daughter d. parent-child

d. parent-child

According to Blanchard and Peale, an organization's ethical policy should be based on all of these EXCEPT: a. pride. b. persistence. c. perspective. d. pattern.

d. pattern.

Outside directors of a firm offer all of the following to the firm EXCEPT: a. objectivity of people and issues. b. detachment from emotional differences. c. dispassionate view and resolution of issues. d. rationalization of unethical or illegal behaviors.

d. rationalization of unethical or illegal behaviors. Hide Feedback

The least expensive and easiest formation of the forms of organization is-- a. partnership. b. corporation. c. limited partnership. d. sole proprietorship.

d. sole proprietorship

According to government surveys, business owners choose to run their businesses out of their homes for all of the following reasons EXCEPT: a. quick and cheap to get up and running. b. save time and money on daily commuting. c. spend more time with family and friends. d. they do not have to maintain a professional office area.

d. they do not have to maintain a professional office area.

a company markets an individual yogurt serving with a collapsible spoon attached to the cup. This firm is pursuing a _____________ strategy.

differentiation

A plan of action designed to provide a product or service with unique attributes that are valued by consumers

differentiation strategy

Garden Hoses, Inc. (GHI) focuses on offering a products that are unique and different from competitors' products. GHI is engaging in the ________ strategy.

differentiation-based

All of the following are entrepreneurial qualities EXCEPT:

domineering

When the franchisor sells another franchise location within the market area of an existing franchisee it is called

encroachment

Readiness to act on existing but unnoticed business opportunities

entrepreneurial alertness

You, as a resident and citizen of USA, are conducting busienss abroad and make decisions based on local interpretations depending on the country you are in. You are using the philosophy of

ethical relativism

A_______should be written as the last step in writing the business plan.

executive summary

The _________ is usually at the beginning of the business plan and summarizes the total plan.

executive summary

The price at which the property would change hands between a willing buyer and willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts refers to

fair market value.

"Piercing the corporate veil" means a corporation has formed strategic alliances with other corporations.

false

A family business's primary function relates to the care and nurture of family members

false

A summary (short plan) is often enough to satisfy most bankers

false

According to the US small Business Administration, small enterprises hire 83 percent of all high-tech employees.

false

Research finds that the general environment affects large businesses and not the small ones, regardless of the industry. a. True b. False

false

Unfortunately, a cost-based strategy usually doesn't work for small companies because they don't have the capacity to produce high volumes. a. True b. False

false

Unlimited liability means that the owner's personal assets outside the business cannot be taken by creditors if the business fails

false

Unlimited liability means that the owner's personal assets outside the business cannot be taken by creditors if the business fails. a. True b. False

false

Writing a business plan should be thought of as the means to an end.

false

Research finds that the general environment affects large businesses and not the small ones, regardless of the industry.

false.

A circumstance or development that alone could render a new business unsuccessful

fatal flaw

A popular tool for studying the industry environment is Porter's five factors. Which of the following is NOT considered part of the five factors? a. Suppliers b. New competitors c. Substitute products and services d. Federal government

federal government

Expenses and costs that are useful in making projections are frequently classified as all of these EXCEPT:

floating costs

A plan of action that isolates an enterprise from competitors and other market forces by targeting a restricted market segment

focus strategy

15. The broad environment, encompassing factors that influence most businesses in a society

general environment

Long-term benefits of adopting ethical and responsible business practices include all of the following EXCEPT:

higher employee turnover

A surrogate variable is used in _________ forecasting.

indirect

The environment that includes factors that directly impact a given firm and all of its competitors

industry environment

An assessment that catalogs the startup's sources of potential strengths

inside-out analysis

As a franchisee, costs involved in renting or building an outlet and stocking it with inventory and equipment are called ________.

investment costs.

Market segmentation, marketing research, and sales forecasting are integral parts of what is commonly called--

market analysis

Most investors are more___________ because they realize what it takes to make money.

market oriented

If you are asked to describe how will you entice customers to make the change to your product or service and to continue using it, which section of a business plan would you address it in?

marketing

A knowledgeable person who can offer guidance based in a given field is called a(n)--

mentor

A _______ assessment is focused less on whether industry conditions overall are suitable to launching a new business and more on the probability of a startup's success over the long run.

micro-level industry

The practice of employing relatives is referred to as--

nepotism

Startup ideas centered around providing customers with new or improved products or services

new benefit ideas

________ refers to startup ideas centered around providing customers with an existing product or service not available in their market.

new market ideas

Startup ideas involving new or relatively new technology, centered around providing customers with a new product

new technology ideas

Identification of potential new products or services that may lead to promising businesses

opportunity recognition

A pattern of behaviors and beliefs that characterize a particular firm refers to its--

organizational culture

the managerial and professional talent of a new venture management team can be supplemented by using ________ assistance. a. outside b. corporate c. in-house d. employee

outside

The study of the general and industry environments of a business context to identify potential startup opportunities

outside-in analysis

Which of the following is NOT true of a C corporation? a. Owners, including stockholders, can be personally liable for the company's debts b. A corporate charter must be approved c. Ownership is easily transferable d. It is a legal entity separate from its owners

owners, including stockholders can be personally liable for the companys debts

Which of the following is NOT true of a C corporation?

owners, including stockholders, can be personally liable for the company's debts.

Of all the relationships in a family business, the _________ relationship is the most sensitive and troublesome.

parent-child

According to Blanchard and Peale, an organization's ethical policy should be based on all of these EXCEPT:

pattern

A plan of action that coordinates the resources and commitments of an organization to achieve superior

performance strategy

The primary source of new ideas is a--

personal experience

The primary source of new ideas is: a. deliberate search. b. chance happening. c. personal experience. d. personal interest.

personal experience

According to John Mullins, the author of The New Business Road Test, all of these key elements should be in every business plan EXCEPT:

personal life descriptors of the entrepreneurs

When Subway operates a restaurant within a truck stop, it is an example of ____ franchising

piggyback

To refocus or recreate a startup if the initial concept turns out to be flawed

pivot

Laws and regulations regarding exports fall under which section of the marketing plan?

place

The description of potential customers in a target market is commonly called a--

pricing

New market info that is gathered by the firm conducting the research refers to--

primary data

Warranties and customer service are included in the ____________ section of the marketing plan.

product

In ______ franchising, a franchisor owns the right to a name or trademark and sells that right to a franchisee.

product and trade name

Which of the following is NOT an area of strategy the marketing plan should address?

production

the executive summary should include all of these subsections EXCEPT:

products and/or service concept

Outside directors of a firm offer all of the following to the firm EXCEPT:

rationalization of unethical or illegal behaviors

Ethical ______ holds the philosophy "When in Rome, do as the Romans do."

relativism

The basic inputs that a firm uses to conduct its business

resources

A family _______ is a gathering of family members, usually at a remote location, to discuss family business matters.

retreat

Relative to Coca- Cola, Pepsi Cola would be considered a ______________ to /for Coca Cola under Porter's Five Forces model.

rivalry

In direct forecasting, _______________ is the forecasting variable.

sales

A facility for making desirable discoveries by accident

serendipity

Accidental discovery involves ________ , the facility for making desirable discoveries by accident. a. luck b. search c. investigation d. serendipity

serendipity

Accidental discovery involves _________, the facility for making desirable discoveries by accident.

serendipity

Women-owned businesses tend to be:

significantly smaller than men's

The least expensive and easiest formation of the forms of organization is a. Corporation b. Partnership c. Limited partnership d. Sole proprietorship

sole proprietorship

The least expensive and easiest formation of the forms of organization is--

sole proprietorship

Ethical companies feel that they have an obligation to their _________, the people who could be affected by the company's actions

stakeholders

A(n) ______ links two or more independent business entities in a common endeavor.

strategic alliance

a(n) ________ links two or more independent business entities in a common endeavor. a. oligopoly b. strategic alliance c. pact d. consortium

strategic alliance

A profitable company that responds to customers' needs while showing reasonable concern for the environment is called a(n)

sustainable small business

Those organizational resources that are visible and easy to measure

tangible resources

In market analysis, ________ could be useful for analyzing the competition.

telephone surveys

For the 10 years ending 2010, one of the most dramatic trends has been?

the increase in minority business owners.

the greatest advantage of buying a franchise is--

the probability of success

An example of a non-quantitative factor inbuying a business is future community development

true

An individual's beliefs affect what that person does on the job and how she acts towards customers.

true

By enhancing a firm's credibility, a business plan serves as an effective selling tool with investors.

true

Outside-in analysis should consider the general environment, or big picture, and the industry setting in which the venture might do business. a. True b. False

true

Ownership is transferred most easily in a corporation

true

Ownership is transferred most easily in a corporation. a. True b. False

true

Pre-emptive rights allow stockholders to buy new shares of stock before they are offered to the public.

true

The death of an owner terminates the legal existence of a business that is organized as a sole proprietorship. a. True b. False

true

The new venture's facilities and location are often discussed in the operations and development plan

true

outside analysis should consider the general environment, or big picture, and the industry setting in which the venture might do business.

true