Entrepreneurship Final
which of the following statements about agency theory are correct?
--agents often maximize their own benefit --managers are considered agents --owners always act to maximize the value of the business
what does the United States Small Business Administration provide?
--aids, counsels, assists, and protects the interests of small business concerns --provides information and assistance at all levels of organizational development and management
Which of the following are typical triggers for starting a business?
--being laid off from a job --reaching a point financially where the risk return level of a proposed new business idea is tolerable --being approached by friends or family with a new business idea
Identify the findings of the federal General Accounting Office's (GAO's) analysis of the impact of the closure of military bases.
--cities with base closings offered tax breaks and programs to support new business development --in cities with base closings, the areas around the bases had income growth higher than the national average
Which of the following are sources of nonequity capital to start a business?
--debts --grants
Which of the following statements regarding a company's compensation system are correct?
--employees often compare their salary with others at their company --it needs to be fair and equitable for all employees --salary and benefits play an important role in maintaining employee morale
Which of the following statements about family members are true?
--family members best know ones abilities and shortcomings --family members are likely to be willing to contribute time and money to the new business --family members are likely to serve as a reality check and support structure
Which of the following groups might be included in an entrepreneur's key support network?
--former employers --friends from school
what is true about equity investments?
--in the case of dissolution, each investor is entitled to the percentage of the break up value equal to their investment percentage --equity investment involves selling a percentage of the business to an outside party
A chart of accounts is simply a listing of each type of activity and each type of asset within the company. Rank the categories of accounts from first to last associated with a chart of accounts.
--income category --expense category --asset category
what are some characteristics of the gap analysis?
--intended to be completed by the entrepreneur or entrepreneurial team in a very short time period --can be completed with minimal or no research --second column lists categories
Which of the following are benefits of a Subchapter S Corporation?
--limited liability for the owners --relatively easy to form compared with subchapter c --legitimacy in the market as a more established form of business --consolidation of business and personal income for tax benefits
Which of the following steps are important to the development of a quality business idea?
--list and evaluate one's personal skill sets --compare one's ability to fill the gaps with the opportunity available --analyze the market and look for a gap
Which of the following are common forms of debt for a new business?
--loans --credit cards --supplier credit
Which of the following are disadvantages associated with Subchapter S Corporations?
--may require a lawyer to process paperwork --expensive, complex formation compared with sole proprietorships --limitation on the number of shareholders
Which of the following statements make interviewing key successful entrepreneurs an attractive way to identify opportunities or gaps?
--most successful entrepreneurs have great ideas --entrepreneurs have a keen eye for what businesses are needed in an area --most successful entrepreneurs are too busy with their own business to pursue new ventures
what are some of the major personality tests that are available?
--myers briggs --enneagram --big five test
What are the typical categories used to analyze a business idea?
--nonfinancial resources --risk --time --competitors --finance
Which of the following contribute to personal skill sets?
--past work experience --current work experience --hobbies --family history
In the context of nonfinancial resources, which of the following are to be considered in a gap analysis for a new business?
--physical location of the business --special contact with customers and suppliers
Which of the following are true statements about a C corporation?
--profits that are not paid out for such items as salaries are retained for future expansion --it considers the owners as employees and pays them salaries and bonuses
Which of the following are components of the entrepreneurial orientation concept?
--risk tolerance --prior experience --personality orientation
A founder or founding team must have synergy, which is a combination of:
--skill set --competitive advantage --understanding of an industry
what are the three basic types of legal business organization?
--sole proprietorship --partnership (general and limited) --corporation (C, S, and limited liability)
what are the critical elements that an entrepreneur must solve for success?
--sustainable operating profit margin --develop an ability to generate consistent and growing sales --sufficient resources to get the business to the point where it is self-funding
What are the key financial issues involved with starting a business?
--the establishment of an accounting system --the funding and the funding level of the firm --the flow of information in the new business
Why should business owners retain employees who add value?
--the hiring process consumes a lot of time and money --it takes time to bring each employee to an acceptable level of performance
An inventory record will include:
--the quantity of the item --an item number --a unit and total cost --a description of the item
which of the following descriptions are characteristics of entrepreneurial firms?
--the start up is self funded or closely funded --the operation is designed in the image of the founder --the number of employees will not be expected to grow beyond 100
Which of the following statements regarding entrepreneurial businesses are correct?
--they are generally dependent on a single individual or a few individuals --they have limited flexibility in responding to emergency issues such as the need to hire replacements if the company loses key individuals
Identify the characteristics of credit cards as a form of nonequity investment.
--they are generally tied to a much higher interest rate than that of a loan --they typically have a set upper limit
Which of the following statements regarding bonus systems are correct?
--they are similar to profit sharing --they are based on the employees performance --they are not as well defined as profit sharing
Which of the following should entrepreneurs do to have a proper justification for firing employees?
--they must be diligent in their efforts to assist poorly performing employees --they must develop a paper trail regarding all employees
which of the following statements are true regarding robber barons?
--they took advantage of the economies of scale --they dominated the industrial sectors --they were responsible for some of the great abuses in business
the business plan for a new entrepreneurial business is developed with three goals in mind:
--to be a guide to managing the business in its early development --to provide a self evalution --to provide closely held investors with the critical information necessary to evaluate the key criteria of a business
what are some characteristics of a venture capital start up?
--well funded by venture capital or angel investment --formed with a harvest plan in place --they are inherently risky operations whose growth is dependent on the exploitations of unknowns in the market --are organized to grow as quickly as possible
Identify the questions that should be considered by an entrepreneur when analyzing the nonfinancial resources category of a gap analysis for a new business.
--what unique skills will be needed to run the business? --what peculiar capabilities offer the entrepreneur a competitive advantage?
what is profit sharing?
a firms offer to share a percentage of the profits at the end of the year or some other period of time with the employees
what is an asset lease?
a form of lease tied to a particular asset used by a business to conserve cash and maintain the latest versions of whatever equipment is available
unlike the business plan of a venture capital backed business, what is the entrepreneurial business plan developed as?
a guide for running the business
what is the agency theory?
a managerial theory that argues that individuals act to maximize their own benefit. thus, in settings where there is a split between ownership and control, the agents must be monitored, or they will act to maximize their own benefit, not necessarily that of those who own the firm
who does grant funding typically come from?
a nonprofit agency or the government
True or false: An entrepreneur's prior experience places boundaries on what he or she will consider when making decisions.
True (an element of entrepreneurial orientation is prior experience. every individual brings to a new business his or her own view of the world. this view of the world places boundaries on what a decision maker will consider as he or she makes decisions)
the _____________ ceiling refers to the fact that women and minorities may be hired by large firms but they experience limits placed on their advancement within the firm
glass
What are special funds that are neither equity or debt funds that are designed to aid businesses in specific areas?
grants
Which of the following describe the roles that human resources management plays in business?
hiring, inspiring, and managing employees
Based on the federal General Accounting Offices analysis, what was the impact of the closure of military bases?
in cities with base closings, several new businesses rose up to fill the economic gap that had resulted from the closings
Which of the following is a principal cause of new business failure?
insufficient financial resources at founding
what is the greatest advantage for an entrepreneurial business?
it is owned and run by the same person(s)
People in an entrepreneur's network can help by providing ______ to a new business.
legitimacy
It is important to record and balance the company account on at least a _____ basis.
monthly
The founders of an entrepreneurial business and the leadership they provide play ______ of a critical role in the business's success than senior leadership does in a typical large organization.
more
the initial analysis is a process of
moving from three to five ideas to a single idea
which of the following is an important driver of the economic success of a community?
new business development
The new business should employ all ______ funding mechanisms available before seeking _____ funding.
nonequity; equity
what does bounded rationality mean?
rational decision making that is constrained by the background and history of the person making the decision
the Equal Pay Act
requires that an employer not discriminate in pay to men and women who do the same job
what is a performance review?
review by the small business owner of an employee's goals and the outcomes over some given time period
the Fortune 500 documents the 500 largest corporations by ________ in the United States
sales
A personality test can help one _____
select the type of business to start
Which type of legal business organization is the simplest form to establish?
sole proprietorship
By providing resources that new businesses cannot otherwise afford on their own, incubators can help these businesses establish _____.
some level of legitimacy
what are threats to operational financing?
specific threats to the new venture in financing its growth, including high development costs, rapid expansion plans, high inventory needs, and/or an entrepreneurial team with a low asset base
Entrepreneurs should work with family members for their advice, potential funding, reality check, and
support structure
what is the master system for tracking the activity of a business?
the chart of accounts
what is synergy?
the connection between the entrepreneur's skills, understanding of an industry, and the ability to create a competitive advantage such that the sums of the parts of the new business is greater than the individual parts alone
what is shrinkage?
the difference between what is sold and what was brought into the business
Besides banks, finance companies, and friends and family, another source of nonequity loans comes from:
the founders
what is the importance of the one page pitch developed by a new entrepreneur?
the one page pitch created by a new entrepreneur while developing a business plan should provide crucial information about the new business idea and offer an effective starting point for every potential supplier, employee, or investor
Which of the following are true regarding the process of generating ideas?
the process typically requires iteration, interaction, and consideration
in entrepreneurial firms the structure of management is designed to do what?
the structure of management is designed to take advantage of the skills of the founder or founders of the firm
what are threats to profit margin?
the threats created to the success of a new venture related to its ability to establish and maintain a high margin product or service
Identify a true statement about the circumstantial motivators for starting a business
they tend to result in more of a defensive positioning than do personal motivations
what are threats to sales generation schemes?
threats created to a new venture regarding its opportunity to sell to many customers and to obtain repeat business
Which category of the gap analysis is typically grossly underestimated by entrepreneurs?
time
Starting a business is often the result of an event or condition within an individual's environment called a
trigger
True or false: It is likely for an entrepreneur to spend more time starting and running the business than doing anything else in life.
true (an entrepreneurial will need to spend a considerable time at the business for it to be successful)
True or false: Small businesses have greater flexibility in responding to changes that take place in their external environment.
true (small business can respond more quickly to changes around them than larger companies that often use committees to approve changes in strategy)
Which of the following is not considered a benefit but is mandated by law?
unemployment insurance
Which of the following is NOT a common form of debt for a new business?
venture capital
the first category of start up business are those formed as high growth, often high tech, ventures and are referred to as ________________
venture-capital backed firms
what is a hybrid compensation system?
a system employed by a small business where there is a salary along with commission
Which of the following is the next step in the hiring process after the job description has been created?
advertising the position
what is a trademark?
claim of intellectual property that is associated with a specific business. this may be the name of the firm, a symbol representing the firm, or its products
Which of the following is a form of debt that is almost always tied personally to the founders, thus exposing them to personal bankruptcy?
credit cards
What is the generic term used to describe any type of nonequity funding tied to the business?
debt
________ is a major source of nonequity financing and can come from banks, credit cards, or suppliers.
debt
the outcome was that following world war 2, entrepreneurial businesses as a percentage of the US economic output began to ____________________
decline
what is human resources?
defined in economics as the quantity and quality of human effort directed toward producing goods and services
It is perfectly acceptable for companies to test their job candidates if a ______ between performance on the test and the skill set necessary for success on the job is present.
direct link
what is the condition that allows the long run average cost to continue downward as production increases?
economies of scale
The underlying philosophy of the ______ test is that people are a result of all the experiences of their life.
enneagram
__________ theory argues that people judge how they are treated relative to how they see others being treated.
equity
Banks have traditionally been a major source of funds for:
established firms (lending to start up firms the risk is perceived to be too high)
the Fair Labor Standards Act (FLSA)
establishes a minimum wage for workers
what is organizational slack?
excess resources in an organization; typically found in large organizations rather than small businesses
large businesses often have _______
extensive written procedures
True or false: According to the contract law, the term length of lease contracts involving new businesses must be more than two years.
false (lease contracts may be of any term length that is agreeable between the parties)
True or false: Workers' compensation laws in the United States require the rates of workers' compensation insurance to be the same in all states.
false (workers compensation insurance is regulated by each state)
the Affordable Care Act
firms with more than 50 employees are required to offer their employees insurance; employers with 50 or more employees can be required to pay a penalty if they do not offer affordable health insurance to its qualified employees
what is crowdfunding?
funds received by a business by soliciting a large number of very small investors usually via the internet
what is an equity investment?
funds received by the business in exchange for a percentage ownership of the business
Besides sole proprietorships, which of the following business forms requires the business debt to flow directly to the owner(s)?
general partnership
Which form of business involves two or more individuals sharing unlimited liability in a business venture?
general partnership
a poor employee has a triple impact on the entrepreneurial firm meaning that:
1. the owners time is lost 2. the organization does not fully benefit from the employee 3. the problems may affect other employees
when examining business risk what are three threats to consider?
1. threats to profit margin 2. threats to sales generation schemes 3. threats to operational financing
One disadvantage of the Subchapter S Corporation is the limitation to the number of shareholders, which is currently set at a maximum of Blank______ shareholders.
100
The United States Small Business Administration started in ________
1953
T or F: Robber Barons were responsible for the collapse of small businesses in the 1880s
False (small businesses continued to thrive as they served the needs of the large industrial sector)
Which of the following sources of skills for a new business is often the most overlooked?
Family experiences
Which form of incorporation is required to pay an income tax?
a C corporation
Along with the business idea, what else should be included in the first column of the gap analysis chart?
a brief explanation of the business idea
what is a loan?
a contractual agreement whereby the firm receives some amount of money that must be repaid over a specified period of time at a specified interest rate
what is supplier credit?
another form of nonequity funding that is available. suppliers will often provide credit on both physical assets and the actual supplies provided
what do business incubators typically provide?
all of the office machines, basic furniture, internet connection, telephones, faxes and copying equipment, and maintenance necessary for a business to begin an operation. most businesses cannot afford a receptionist, whereas in a business incubator there is a common receptionist
Unlike a Subchapter C Corporation, a limited liability corporation (LLC) _____
allows for the flexible treatment of profits from the organization
what is a gap analysis?
an analysis where you identify a gap or opportunity that exists between the demand for a product or service and the supply provided by firms in the market
What is the suggested starting point for generating business ideas?
analyzing the skill set of the potential founders
what is a copyright?
ownership of creative materials the copyright holder has generated, such as books, magazines, advertising copy, music, artwork, or virtually any other creative product whether published or unpublished
A separate accounts ______ record should be maintained for each creditor.
payable
Which accounting record tracks time for hourly workers and attendance for salaried employees?
payroll
Once a list of skills, abilities, and interests has been developed, the next step is to:
perform a gap analysis
Which account should be used when there is an expense too small to write a check for or when a check is simply inappropriate?
petty cash register