Foundations of Business: Chapter 5

list of small business facts on page 131

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QUESTIONS FROM QUIZZES

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see table 5-4 for rights and obligations in a franchise agreement

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what are the 3 types of franchising

1- a manufacturer authorizes a number of retail stores to sell a certain brand name product (prevalent in sales of cars, farm equipment, shoes, paint, petroleum) 2-a producer licenses distributors to sell a given product to retailers. (most common in soft drink industry) 3-a franchisor supplies brand names, techniques, or other services, instead of the complete product (most common type; used in mcdonalds, subways, hampton hotels, anytime fitness) (pg 148-149)

what 4 questions should the business plan answer

1- what exactly is the nature and mission of the new venture 2- why is this new enterprise a good idea 3-what are the businessperson's goals 4-how much will the venture cost (pg 143)

what are 5 personal factors in small business success

1-independence 2-desire to determine one's own destiny 3-willingness to find and accept challanges 4-family background 5-age (pg 134)

what are 5 advantages to small businesses

1-personal relationships with customers and employees 2-ability to adapt to change 3-simplified record keeping 4-independence 5-other advantages (ease and low cost of entering/exiting the market, keep all profits, keep business information secret) (pg 140-141)

what are 3 disadvantages to small businesses

1-risk of failure 2-limited potential 3-limited ability to raise capital (pg 142)

when was the SBA created

1953 (pg 144)

in the last decade, the number of small businesses in the US has increase _____ %

49 % (pg 132)

what is the main disadvantage of franchising

-the possibility of contract disputes (pg 152)

Statistics show that most small business failures are related to A. poor management B. lack of proper financing C. the owner's lack of vision D. in-fighting among the owners

A. poor management

Your friend, Linda, started a graphic design firm about a year ago. The business has done well, but it needs a lot more equipment, computers, and employees to continue expanding. Linda does not see any problem because she thinks she can easily get all the money she will need from her local bank. What advice might you give her? A. She is right, the bank is likely to lend her as much as she needs because banks primarily focus on supporting small businesses. B. She should consider alternative sources of financing because banks provide only about one-fourth of the total capital to small businesses. C. She should not accept any new clients so that she can end the need to add additional equipment and employees. D. She is crazy, banks do not lend money to small businesses but only to well- known, well-established organizations. E. She should sell her business immediately before it fails because most small businesses fail during the first five years.

B. She should consider alternative sources of financing because banks provide only about one-fourth of the total capital to small businesses.

what does SBIC stand for and what is it

Small business investment company; a privately owned firm that provides venture capital to small enterprises that meet its investment standards (pg 148)

Which form of business is the easiest to start? A. Entrepreneurship B. Sole proprietorship C. S-corporation D. Partnership E. Corporation

B. Sole proprietorship

Sandy is tired of her boss as well as corporate America in general. She decides she would like to start a business where no one tells her what to do, and she can always make the decisions. The best form of business for Sandy is a(n) A. limited partnership. B. sole proprietorship. C. S-corporation. D. singleship. E. partnership.

B. sole proprietorship.

Small businesses enjoy several unique benefits that larger firms may not have such as A.personal relationships with customers and international competition B. the ability to adapt to change and simplified record keeping C. independence and paid vacation time D. higher profits and limited risk of failure

B. the ability to adapt to change and simplified record keeping

Which of the following is not a disadvantage of the corporate form of ownership? A. Lack of secrecy B. Expense of incorporation and selling stock C. Limited liability D. Double taxation E. Difficulty of formation

C. Limited liability

A business plan is essential for starting a new business because it ______ A. provides information to the Internal Revenue Service B. helps the business owner track, monitor, and evaluate vendors C. can serve as a communication tool for employees and investors D. is a guide for the person starting a business

D.

To qualify as a small business, a retailing establishment may not exceed annual sales of A. $3 million to $6 million. B. $12.5 million. C. $1.2 million to $4 million. D. $7.5 million. E. $2.6 million to $5 million.

D. $7.5 million.

Robert is the director of a university-based group that provides individual counseling, specialized training, and research data to owners of small businesses. Robert's group is called a A. center for small businesses. B. university small-business administration. C. small-business improvement coalition. D. small-business development center. E. small-business institute.

D. small-business development center.

Lenny decided to open a local franchise of the well-known Mc-Queen Chicken, a fast-food restaurant. Before he took the initiative to open the franchise, he tried to weigh all the advantages and disadvantages. He decided, based on his research and understanding, that it would be beneficial to open a local fast-food restaurant. Refer to Mc-Queen Chicken. Which of the following would be an advantage for Lenny? A. Contract disputes B. Disagreements increasing C. The franchisor maintaining a great deal of control D. Guidance from the franchisor E. Franchise holders paying for their security

D. Guidance from the franchisor

A franchisor supplies all of the following except A. the name of the shop. B. any necessary training. C. advertising materials. D. land to place the business on. E. the methods of doing business.

D. land to place the business on.

Through her university, Marilyn and her classmates work together to provide management counseling to small businesses in their community. This is called a A. small-business administration. B. community improvement council. C. small-business development center. D. small-business institute. E. small-business investment company.

D. small-business institute.

Not-for-profit organizations must meet specific guidelines in order to obtain tax-exempt status. These guidelines are structured by the A. U.S. Uniform Partnership Act. B. board of directors. C. Chamber of Commerce. D. U.S. Bureau of the Census. E. Internal Revenue Service.

E. Internal Revenue Service.

Which of the following was established to arbitrate disputes between franchisors and franchisees? A. Court system B. Partnership for Franchisees' Rights C. Association for Franchise Arbitration D. Federal Trade Commission E. National Franchise Mediation Program

E. National Franchise Mediation Program

Which of the following is the most likely example of a production industry? A. Telephone company B. Financial enterprise C. Transportation company D. Movie theaters E. Subassembly plant

E. Subassembly plant

A new small business, Underwater Wildlife, has opened to sell tours of underwater sites around the country and in South America. However, money has to be paid up front by the Underwater staff to book hotels and other travel arrangements before its clients have paid for the tours. That means Underwater is facing a potential A. insurance difficulty. B. business plan crunch. C. inventory-flow problem. D. employee expansion task. E. cash-flow problem.

E. cash-flow problem.

Recently, Amazon announced it was purchasing Whole Foods for $13.4 billion. Amazon is an online retailer which sells everything from books to batteries and Whole Foods is a natural and organic foods grocer. This is an example of a A. hostile takeover. B. leveraged buyout. C. horizontal merger. D. vertical merger. E. conglomerate merger.

E. conglomerate merger.

what are some advantages of franchising

FOR THE FRANCHISOR -gains fast and controlled distribution of its products at a low cost -results in more capital avaliable for advertising/expand production -can ensure that the outlets are maintained and operated according to its standards ------------------------------------------------------- FOR THE FRANCHISEE -has the opportunity to start a business with limited capital and makes use of the business experience of others -outlets with nationally known names have guaranteed customers -receives advise from the franchisor -recieves materials to use in local advertising, and can participate in national ad campaigns sponsored by the franchise (pg 151-152)

Every business must keep records of sales, profits and losses, fixed assets, contacts, tax returns, customers, and a variety of other information that affects the growth and operability of the business. Which of the following is true about small business? a. Record keeping does not vary much between large and small firms. b. Record keeping for large firms requires greater exactness than small firms because minute mistakes can have a cascading effect and cause the destruction of multiple business enterprises. c. Record keeping for small firms requires greater exactness than large firms because even minute mistakes can throw the business into financial straits. d. Many small firms need only a simple set of records.

IDK GOOGLE IT

What percentage of home-based businesses have no employees? a. Over 70% b. Over 90% c. Under 30% d. Under 50%

IDK GOOGLE IT

The government agency that advises and assists small businesses by providing management and financial assistance including counseling on improving operations and assisting with obtaining debt financing is known as the _____. a. Small Business Administration (SBA) b. Better Business Bureau (BBB) c. Service Corps of Retired Executives (SCORE) d. small-business development centers (SBDCs) e. small-business institutes (SBIs)

NOT E ---probably A

what kind of businesses are included in the service category

Non-Financial Services such as medical and dental care or watch, shoe and TV repairs Financial Services such as accounting, insurance, real estate (pg 132)

T//F: franchising began around the time of the civil war

T (pg 149)

what is a small business

a business that is independently owned and operated for profit and is not dominant in its field (pg 130)

what is a business plan

a carefully constructed guide for the person starting the business (pg 143)

what is the SCORE association

a group of business people who volunteer their services to small businesses through the SBA (pg 145)

what is a franchise

a license to operate an individually owned business a s thought it were a part of a chain of outlets or stores (pg 148)

what is a franchisee

a person or organization purchasing a franchise (pg 148)

Which of the following is NOT an advantage of smallness in business? a. Easy to raise capital b. Personal relationships with customers and employees c. Simplified record keeping d. Ability to adapt to change e. Independence

a. Easy to raise capital

What is meant by dual-branded franchises? a. Two franchisors offer their products together b. One product carries different brand logos in two different locations c. Two franchisees interchange brands d. One franchisor offers its products to two different franchisees

a. Two franchisors offer their products together

what is a franchisor

an individual or organization granting a franchise (pg 148)

Franchising agreements fall into three general categories, which of the following is not one of those categories? a. A producer licenses distributors to sell a given product to retailers. b. A distributor franchises the channels of distribution to franchisees. c. A manufacturer franchises retail stores to sell its products. d. A franchisor supplies brand names, techniques, or other services instead of a complete product.

b. A distributor franchises the channels of distribution to franchisees.

Which of the following is the most likely reason that a small-business owner may become frustrated as a franchisee? a. Site selection b. Excessive restrictions resulting in less freedom c. Creating and managing national advertising d. Reduced stress and responsibility e. Management training and support

b. Excessive restrictions resulting in less freedom

Which of the following is considered a shortcoming of owning a franchise? a. National and local advertising programs b. Possible market saturation c. Centralized buying power d. Guidance and advice from the franchisor e. Can start a business with limited capital

b. Possible market saturation

Basic rights and obligations are delineated in a franchise agreement. Which of the following is a franchising obligation? a. Rights to obtain supplies from nominated suppliers at special prices b. Requirement to purchase goods or products from the franchisor c. Use of the franchisor's copyrighted materials d. Follow guidelines established by the franchisor regarding exclusive territorial rights

b. Requirement to purchase goods or products from the franchisor

_____ are business clinics, usually located on college campuses that provide free counseling and training for owners of small businesses. a. Service Corps of Retired Executives (SCORE) b. Small-business development centers (SBDCs) c. Small-business investment companies (SBICs) d. Self-employment assistance (SEA) e. Better Business Bureau (BBB)

b. Small-business development centers (SBDCs)

Which of the following is a way in which the Small Business Administration provides financial assistance to small businesses? a. Service Corps of Retired Executives (SCORE) b. Small-business investment companies (SBICs) c. Self-employment assistance (SEA) d. Small-business development centers (SBDCs) e. Better Business Bureau (BBB)

b. Small-business investment companies (SBICs)

According to the U.S. Office of Management and Budget, __________ of the major technological advances of the 20th century originated with individual inventors and small companies. a. nearly all b. more than half c. less than 10% d. about one-fourth

b. more than half

____________ is a new alternative to traditional financing that uses online sites to invite people to contribute. a. Selling life insurance policies to companies who become the policy beneficiaries b. Angel investing c. Credit cards d. Crowdfunding

d. Crowdfunding

Knowledgeable entrepreneurs choose areas with which they are familiar. These are most often the more established industries that require only a ___________ investment and some special ______________. a. high initial; industrial tools b. mid-sized initial; on-the-job training c. low initial; skills or knowledge d. low initial; on-the-job training

c. low initial; skills or knowledge

A franchisee acquires rights to all of the following, except: a. methods of operation of the business. b. a name. c. other franchisee's employees and management. d. a logo. e. national advertising by the franchise.

c. other franchisee's employees and management.

what are the 3 things that are the key ingredients to the survival of a small business, but also common reasons for failure

capital, management, and planning (pg 136)

what are the 3 basic purposes for a business plan

communication, management and planning (pg 143)

what kind of businessess are in the production category

construction, mining and manufacturing industries (pg 133)

Jeffrey Inc. is a large business that produces off-road vehicle parts. In addition to this market stream, Jeffrey produces auto parts, boat parts, and parts for machinery and equipment. Inventions, LLC is a small business that focuses only on the off-road vehicle market and has created lighter weight, stronger, and more efficient parts for off-road vehicles. Its primary market is off-road racing which it believes will serve the dual purpose of showcasing its product and filling the needs of its customers. Inventions has significantly increased its market share in the off-road vehicle parts market over the years causing Jeffrey to revamp its marketing techniques and reanalyze its customer's needs. Which of the following is true about the relationship of small businesses to large businesses? a. Small businesses can only dominate in an area of business if many firms join together to offer the same goods or services. b. When compared to large businesses, small businesses take more time to respond to customer's needs because they hesitate to invest in new product lines out of fear of having the line fail and losing money as a result. c. Large businesses must create different departments that resemble small businesses in order to effectively compete against small businesses. d. Small businesses challenge larger, established firms in many ways, causing them to become more efficient and more responsive to consumer needs.

d. Small businesses challenge larger, established firms in many ways, causing them to become more efficient and more responsive to consumer needs.

The growth of women and minorities in franchising is attributable to which of the following activities? a. More women and minorities graduating from business college b. Banks having loan programs targeted at women and minority business owners c. Women and minorities having a greater work ethic than nonminority males d. Special outreach programs designed to encourage franchisee diversity

d. Special outreach programs designed to encourage franchisee diversity

what are the 3 broad categories of industry

distribution, service, production (pg 132)

John had a good idea for a candy manufacturing business. He decided that he wanted to take the risk, become an entrepreneur, and start his own business. Now, ten years later, John's candy company has 20 locations all over the United States and employs nearly 1,000 people. This example illustrates: a. that there is a large demand for candy in the United States. b. that small businesses have little effect on the economy. c. that entrepreneurs are of superior intelligence. d. the risks associated with entrepreneurship. e. how small business fuels job creation and innovation.

e. how small business fuels job creation and innovation.

what is venture capital

money that is invested in small (and sometimes struggling) firms that have the potential to become very successful. (pg 147)

according to Brian Hendricks, what are the 5 "p's" of entrepreneurship

planning, persistence, patience, people, profit (pg 136)

what kind of businesses are included in the distribution category

retail, wholesale, transportation, and communication (pg 132)

what is the SBA and what does it do

small business administration; a government agency that assists, counsels, and protects the interests of small businesses in the US (pg 144)

what does SBDC stand for, and what is it

small business development center; university based groups that provide individual counseling and practical training to owners of a small business (pg 146)

what does SBI stand for, and what is it

small business institutes; groups of senior and graduate students in business administration who provide management counseling to small businesses (pg 146)

Studies show that the incidence of innovation among __________ (limited liability, medium, small, large) -business workers is significantly higher than among workers in ___________ (incorporated, large, medium, small) businesses

small, large

what is franchising

the actual granting of a franchise (pg 148)

what is a dual branded franchise

when 2 franchisors offer their products together (mcdonalds attached to a gas station) (pg 150)