Starting a New Business Final Study Guide

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Claude is thinking about starting an online business selling high-end men's leather accessories—wallets, boots, hats, and belts. When looking at market size during his secondary research, Claude is first interested in the TAM. Which statistic would help Claude determine the TAM for his business?

49.2 percent of the U.S. population is male.

________ occurs when the owner of real property does not enforce property rights and allows a non-owner to use the property as if it were his or her own.

Adverse possession

Which of the following statements is not true of computerized accounting systems?

All systems have a cost attached with the cheapest system being about $10 per month.

________ is an estimation of what a price should be based on information a consumer gathered, such as advice, advertisements, or comparison shopping.

An external reference price

________ are assets that are expected to provide economic benefits for periods of time greater than one year.

Capital assets

________ refers to the process of deciding among various investment opportunities to create a specific spending plan.

Capital budgeting

________ refers to the percentage expense of obtaining future funds.

Cost of capital

________ is an arbitrary, but regular and systematic, method used to take asset value as an expense for the purpose of calculating net income or loss.

Depreciation

Which of the following statements concerning business risks related to the property of the business is true?

Each type of property involves specific forms of risk.

________ refers to the machinery, tools, or materials used in the performance of the work of a business.

Equipment

Which of the following statements is true of documenting the operations of your business?

Every business process does not have to be extensively documented.

________ is a method of borrowing money secured by a firm's accounts receivable.

Factoring

________ is a process of communicating within or to an organization about how the outputs worked or were received.

Feedback

________ exist for the purpose of addressing some identified social need that cannot be adequately met by market forces.

Foundations

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Which of the following is not one of the three tests of the approach when crafting a customer-focused value proposition?

How does your price compare to competitors' prices?

Which of the following statements best describes the process of idea screening in new product development?

Idea screening is the process of selecting the most promising ideas to be further evaluated.

________ uses agents, export management companies, or export trading companies as intermediaries to handle most of the exporting process.

Indirect exporting

________ is the determination of the amount of assets held by the firm for sale or production.

Inventory valuation

Which of the following is true regarding buyout insurance?

It is a type of disability insurance.

________ ratios measure the business's ability to pay debts and expenses that are due in the current accounting period.

Liquidity

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Which of the following statements is true of marketing research?

Marketing research can tell you what customers consider a reasonable price.

________ analysis is based on the concept that a dollar to be received right now has more utility than does a dollar to be received at some time in the future.

Net present value

Which of the following statements concerning financial management is correct?

Obtaining money for your start-up is only the beginning of financing a small business.

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Which of the following statements is true when comparing marketing plans and business plans?

Only the marketing plan contains the marketing budget and projections.

________ allows you to find out the buyers' main concerns and address them; in advertising you can only guess.

Personal selling

Which of the following statements is true about pure services?

Pure services are heterogeneous.

When determining the relationship between an initial investment and the profits that are expected to be received from making that investment, divide the average annual profits by the average investment to determine the

ROI.

________ is provided by state and local governments, primarily to encourage specific activities that are expected to improve the blighted areas or provide additional employment.

Tax abatement

________ is an accounting approach based on specific accounting requirements set by governmental taxing agencies.

Tax accounting

Which of the following is true of using internal audits to manage risk?

The owner should provide sufficient authority to the auditor to ensure that he or she can accomplish the goals of the audit.

Which of the following statements is not true of financing with leases?

The two types of leases differ primarily in how the property is acquired in the beginning.

Which of the following is a difficulty that arises in understanding and interpreting the income statements?

There are disputes over when to recognize revenues.

________ is collected by the IRS and state agencies as a percentage of tax upon payroll.

Unemployment insurance

Which of the following is true of insurance coverages?

Vehicle liability insurance is mandated by the legislatures of all the states and territories of the United States.

The "business entity" concept of accounting indicates that

a business has an existence that is separate from its owner.

Which of the following can be exercised only when presented with specified shipping records?

a documentary draft

Which of the following answer options describes a target price set by a manufacturer for a product or service intended to provide profit for each intermediary in the distribution channel?

a manufacturer's suggested retail price

Many businesses have either relatively few large sales events or highly seasonal sales that complicate forecasting cash inflows. Which of the following is not an example of such a company?

a restaurant

The "going concern" concept states that

a successful business will stay in business.

The total cost of obtaining an asset, including such costs as purchase price, transportation, installation, testing, and calibrating in order to ready it for its first productive use is termed as

acquisition cost.

Diversification is a strategy whose goal is growth, based on

adding new products or services to the firm's existing collection of offerings.

A(n) ________ refers to a middleman business that represents a manufacturer's products or services to other business-to-business middleman firms.

agent

Which of the following has low overhead and unlimited shelf space and thereby can afford to take on an unknown firm or product?

an e-tailer

The information that the account holder knows about his or her account, but the bank does not know, includes

any direct payments made to the account by the holder's customers.

Which of the following concepts assume that information flows from the income statement through the statement of retained earnings, the statement of owner's equity to the balance sheet?

articulate concept

A just-in-time (JIT) inventory system attempts to reduce inventory levels to the absolute minimum by

assembling the product in the absolute minimum time possible.

The gains provided (the benefits) or the help given (the pains removed) by the product or service your firm offers is your

brand promise.

The ________ is a term applied to the schedule and the process for setting the schedule for making purchases by an individual or an organization.

budget cycle

A(n) ________ identifies when, how, and why money is expected to come into the business, and when, how, and why it is expected to leave.

cash budget

Debt investments that mature in less than three months are an example of

cash equivalents.

Cash that can be obtained from stocks, bonds, land, buildings, or equipment that a business has is called

cash flow from investing.

Money that is immediately available to be spent is called

cash.

A reduction in the bank account of a merchant by a credit card company is termed

charge back.

Two forms of short-term financing are short-term debt and

commercial paper.

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. From an entrepreneur's perspective, marketing is all about connecting your customer to your product or service. The first step in this process is

connecting the two through the value proposition.

Which of the following ratios is better when it is a lower number?

debt to assets ratio

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Marcie works at a public library and she is responsible for purchasing all audiobooks for the library. Marcie reads reviews of the titles from the available monthly circulars, choosing the titles she would like to add to the collection. Marcie then sends the order to the technical services department where Linda places the order. In this case Marcie is playing the customer role of

decision maker.

Hugh starts his own animation company by borrowing funds from his parents. His parents tell him that he can repay them when the business is generating profits. This is an example of

deferral.

When Tyree buys a new computer, he pays for it with a personal check. This is an example of using a

demand deposit.

Regular and systematic reduction in income that transfers asset value to expense over time is called

depreciation.

Tara's yarn shop held a sidewalk carnival with games and prizes in front of her store with proceeds benefitting a local family who had lost everything in a fire. The local paper stopped by to take pictures and interview participants. The resulting story in the paper was a form of

earned media.

Which of the following is a statistical technique that determines the size of inventory that a business must hold to minimize total inventory cost?

economic order quantity

Which of the following international strategies is usually inexpensive, quick to start, easy to change, and less risky than the others?

exporting

The research and development team of Leonide Inc. has generated five different product ideas. All five ideas are being rated against each other on their characteristics such as product uniqueness, idea profitability, protectable intellectual property, and product team quality. Based on their ranking in this stage, only three ideas will make it to the immediate next step which will be the stage of

feasibility study.

When the financial management needs of a business are to reinvest for maintenance or to build owner wealth, the business needs

financing for operations.

Which of the following answer options is not one of the most commonly identified sources of U.S. business risk small businesses face?

government instability

Which of the following is an example of a secondary target market?

grandparents buying toys for their grandkids

Gifts of money made to a business for a specific purpose are referred to as

grants.

Which of the following statements lists revenues and expenses and shows the amount of profit a business makes for a specified period of time?

income statement

For an owner, the main financial management emphasis while transferring a business to family members must be to

increase asset value.

When debt increases as a percentage of total investment, returns on equity

increase at a decreasing rate.

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. A customer role describing a person or group who can make credible or recognized suggestions or recommendations to others regarding purchase choices is the

influencer.

Separation of duties is most important for

intangible assets.

In the new product development process, the product development stage typically involves

introducing product prototypes to test markets.

A(n) ________ budget combines a purchases budget with a cost of goods sold budget.

inventory

In the context of accounting functions, which of the following is true of accounts receivable?

it records provision of credit to customers

Which of the following is one of the advantages of the return on investment (ROI) analysis?

it relies on accounting information with which investors are comfortable

Trini's company manufactured medical devices and nearly all of their sales were to hospitals. Which type of media should Trini's company use to target their direct response advertising?

magazine

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Systematic collection and interpretation of data to support future marketing decisions is

marketing research.

Of the following answer options, which is the most available funding source for new businesses?

owners' equity investments

Tammy is talented at crafts but lacks the cash flow management skills required to run a business. She opens a store, Tammy's Craft Corner, with the help of her son David—a business major—who would manage the budgets and expenses of the business. Tammy buys her craft materials on credit from her supplier but clears all her debts at the end of every month. The amount that Tammy owes her supplier is referred to as

payables.

A system of recording the receipt and sale of each item as it is soldis called a

perpetual inventory.

Tara's friend Robbie worked at the local coffee shop. Tara always stopped to get her morning coffee from the shop because Robbie would fix her a deluxe coffee but only charge her for a standard cup of coffee. This is an example of

phony disbursements.

Giving a third party legal rights to debts owed by the business in order to provide assurance that borrowed money will be repaid is called

pledging receivables.

Which of the following layouts is most appropriate for low-volume, flexible manufacturing?

process layout

How much of each message conveyance a business owner uses to sell his or her product as well as his or her objective in using each one is known as

promotional mix.

Customers may ________ themselves by asking for more information after finding your website or responding to a direct mail advertisement.

prospect

Which of the following sets of numbers are the three you need to arrive at your sales forecast?

prospective customers, hit rate, and sale amount

Ty ran a shop that sold and traded sports cards and sports memorabilia. He bought space on a billboard overlooking one of the main highways into the city and included the shop's phone number (555-CARDS). The shop soon received a flood of phone calls inquiring about his location, stock, and business hours. The number of customers entering the store increased by tenfold and his sales doubled. Every person who traveled to Ty's shop to look at his inventory as a result of his billboard promotion are

prospects.

Which of the following answer options is one of the four steps in the "Get Customers" portion of the customer development funnel for physical products?

purchase

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Marcie works at a public library and she is responsible for purchasing all audiobooks for the library. Marcie reads reviews of the titles from the available monthly circulars, choosing the titles she would like to add to the collection. Marcie then sends the order to the technical services department where Linda places the order. In this case Linda is playing the customer role of

purchaser.

After ________, the corrected bank balance and corrected book balance will be identical.

reconciling

The most common form of institutional gift financing is in the form of ________.

reduced taxes

Identify the type of service location in which face-to-face meetings with clients are infrequent.

remote location

A ________ is a concession which covers the time while you prepare your location prior to opening.

rent-free use period

Paying for a local organization's needs in exchange for recognition is referred to as

sponsorship.

Which of the following is the most common noncash incentive given to an employee?

stock options

Which of the following is not one of the four key factors considered when determining an optimum price?

supply chain costs

A jewelry store promises to deliver custom-made wedding rings to a buyer within 2 weeks. However, it charges ten percent of the sales price in advance. In this example, which of the following techniques is the store using to increase cash inflows?

taking deposits and progress payments

Which of the following is not one of the primary causes of cash flow problems for small businesses?

tax obligations

Insurable value is defined as

the amount of an asset for which a company will write an insurance policy.

The core product typically includes

the basic description of what a company or a product does.

The output level necessary to attain any specific profit goal is calculated by adding the desired profit to the fixed cost then dividing the sum by

the contribution margin of one unit.

Which of the following is the key to customer relationship management (CRM)?

the data on current or prospective customers

The weighted average cost (WAC) refers to

the expected average future cost of funds.

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. The makers of baby wipes began advertising their products for adult use, now promoting them for everyone's use. This is an example of a product during which stage of the product life cycle?

the maturity stage

An implication of the bounded rationality models of management is that

the more information available to be included into the decision process, the less efficient that process will be.

The most common strategy employed by small businesses for handling money shortages is

using personal money.

The difference between an actual and budgeted revenue or cost is called

variance.

Which of the following is not an example of a direct sales method?

word of mouth

When documenting the operations of your business, which of the following answer options contains the most detail?

work instructions

Which statement concerning the loss of key employees is not true?

Key employees rarely become competitors.

________ ratios measure the relative risk that a business setback could cause bankruptcy.

Leverage

Which of the following statements is true about products?

Most of the products sold today are combinations of both goods and services.

________ is money from selling part of a business to people who are not and will not be involved in the management of the business.

Outside equity

________ refers to family or friends letting you add your purchases with theirs in order to get lower prices.

Piggybacking

________ is the ratio measure of how well a firm does in using its inputs to create outputs.

Productivity

Which of the following examples is an instance of co-marketing?

a summer promotion with Heinz catsup and Ballpark franks

When an entrepreneur gets funding for his business from an account that his family had initially set up for his future education or a first home, it is referred to as

accelerated cash-out.

When Akira was searching for a location for her new service business, her main priority was securing a place with the lowest cost, within a reasonable distance, and with adequate storage room for her equipment. Akira likely had what typical location for her services?

at a mutually accessible location

Identify the managerial accounting technique that looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize gains.

cost-volume-profit analysis

The computers at a graphics design company were stolen recently. Which of the following insurance that the company holds will repay the losses incurred?

crime insurance

Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business, are called

noncore projects.

Which of the following is a technique used by a small business to increase cash inflows?

offering discounts for prompt payment

A type of internal control that separates the physical control of an asset from the person accounting for that asset is called

separation of duties.

Which of the following is not a way risk can directly shared?

share risk with competitors

The first task to be completed before a comprehensive insurance program for a business can be developed is

to identify risks.

________ refers to the contacts business owners periodically make with customers in order to remind them of their business, and their interest in customers' business.

Follow-up

________ are used to pay losses that are not covered by other liability insurance.

General liability insurance

Which of the following statements is not true of using insurance to manage business risk?

It is possible to use insurance to avoid all types of business risk.

Which of the following statements is not true of joint ventures?

Joint ventures are the most commonly used method of reducing the costs and risks of acquiring capital assets.

The term for measures or metrics that identify the outcomes that are most important to the success of a business are known as

KPIs.

________ is a general term for real estate, but it can also be applied as a legal term for anything owned or possessed.

Property

________ refers to laws and governmental rules that limit the freedom of business owners to manage their businesses as they please.

Regulation of the workplace

Which of the following statements is always true of sales promotions?

Sales promotion is one of the major forms for marketing.

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Which of the following statements is not true of creating a customer profile?

The goal of these interviews is to get as many biased responses as possible.

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. Which of the following statements is not true of the product life cycle?

The risks from competition in the introduction stage are generally high.

One of the two steps in the "Get Customers" portion of the customer development funnel for web or mobile products is activate, and the other step is

acquire.

The sum of money that has actually been received and paid out of a depositor's account is termed

bank available balance.

Tammy has just opened a donut shop called The Rabbit Hole. Given that The Rabbit Hole is in its start-up phase, which of these would be Tammy's immediate financial management need?

conserving what little money the business has

Sales promotion techniques used to introduce your brand to customers without an immediate call to purchase are ________ techniques.

contest

While teaching strategy at Farrell University, Jessica developed an interactive strategy-simulation game to inculcate the concept of strategy to her students. She found that they were able to grasp the concept much better from the game rather than from reading books. For two years Jessica used the game to teach students. Eventually she removed possible glitches and perfected the game. She wanted students at other universities to benefit from the simulation. The result was the launch of Simulate Strategy, Inc. Jessica places an advertisement about her product with her email and contact information in the "Chronicle of Higher Education," a leading publication for University professors. Which of the following marketing strategies exemplifies this scenario?

direct response advertising

Identify the layout that is very efficient and organized but lacks some visual impact.

grid layout

Which of the following statements is true regarding the balance sheet?

it's values are considered as historical values

Which of the following is true of financial management for a business exit?

its main emphasis is on conserving what little cash the business has

Contests are a specific form of the key Media Integration techniques of ________ which involves paying for mailing lists of potential customers, or selecting target markets or buying subscriber lists on social media sites to whom advertisements will be shown.

lead generation

Which of the following is an example of a high customer contact business?

legal offices

Which of the following is not an advantage for providing credit to customers?

lenders are more likely to provide financing

In the accounting equation, assets equal

liabilities plus owner's equity.

The proof of a CRM effort is seen in

more tracked prospects making initial purchases.

Axion Inc. is a small business started by Robert. As the business grew, he decided to implement new company policies that would ensure that his employees are not encouraged to set up competition against Axion. Which of the following techniques should he adopt to achieve this?

negotiate contracts with key employees that limit their freedom to go into competition

When people come to your website based on their own actions, where you have not paid for the link is ________, also called an unpaid search.

organic traffic

The sum of all profits and losses, less all dividends paid since the beginning of the business is called

retained earnings.

Working proactively to ensure that your physical place of business is (1) free of potential hazards and (2) ________ will prevent on-premises injuries and violations of EEOC or OSHA rules.

secure from intruders

Which of the following is more indicative of a business's financial strength?

short-term investments

Tony is a whiz in the kitchen. Not only does he make great food but he has invented about a dozen time-saving kitchen gadgets along the way. These are all home-made inventions made either by using new materials or by modifying existing gadgets to work in new, better ways. He has made duplicate gadgets for friends and some say they use the gadget every day. Tony quit his construction job to concentrate on his kitchen gadgets—he started his own company, Kitchen Helpers. According to the Panel Study of Entrepreneurial Dynamics (PSED), when an entrepreneur comes up with the idea themselves, the single greatest idea source is from

their experience in a particular industry or market.

Which of the following is not true of personal selling?

there is no formula for personal selling

Business owners can figure how to better target ads or promotions to particular types of customers if

they link sales and purchase basis to the type of customer.

According to the Association of Certified Fraud Examiners, what is the number one method for fraud detection?

tips

In microinventories, you try to buy your product or prepare your service after

you get an order.