BUSINESS 491- Exam 2

In the book "Art of the Start" the author recommends that pitchers envision a little man on their shoulder while pitching, and that little man should ask after each statement the pitcher makes.

"So what"

The elimination of discretion, or choice, at the operating level of one's business is referred to as which of the following terms?

Orchestration.

In terms of the foundation components of building a prototype of one's business, innovation without is ineffective.

Quantification

The______ test that a business plan must pass in order to attract financing from lenders and investors involves proving that a market for the company's product or service actually does exist and that the company actually can build it for the cost estimates included in the plan.

Reality

The fist task that much be accomplished when making a pitch is to answer which of the following questions?

"So What"

Which of the following documents must an entrepreneur file to create a limited liability company?

1. The articles of organization 2. The operating agreement.

The firm's Strategic Objective part of its business program development is a product or result of which of the following types of plans?

Life

Which of the following is true regarding the corporate form of ownership?

A) Generally has the greatest ability to accumulate capital. B) Most complex form of ownership. C) Separate legal entity in the eyes of the law.

Which of the following statements about the preparation of a business plan is/are not true?

A) Grammatical and spelling errors in a business plan don't really count since potential lenders and investors judge the quality of a plan by its content.

Which of the following statements concerning financing the purchase of an existing business is true?

A) It is usually more difficult than securing financing for a start-up business. B) Usually, the business seller is not a good source of financing. C) The buyer should be able to make the payments on the loans out of the company's cash flow.

Which of the following is true with respect to the due diligence process of analyzing and evaluating an existing business?

A) It may be just as time consuming as the development of a comprehensive business plan for a start-up. B) It helps to determine if the company will generate sufficient cash to pay for itself and leave you with a suitable rate of return on your investment. C) It helps to determine what the company's potential for success is.

A business plan is a written summary of which of the following?

A) an entrepreneur's proposed business venture. B) a business venture's operational, financial, and marketing details. C) the skills and abilities of a business venture's managers.

Important factors to investigate regarding the business to be purchased include which of the following?

A) assessing the physical assets of the business. B) reviewing accounts receivable and business records. C) reviewing contractual arrangements and assessing intangible assets.

When acquiring a business, the buyer should do which of the following?

A) conduct a self-analysis of skills, abilities, and interests. B) prepare a list of potential candidates. C) investigate potential candidates and carefully evaluate them.

A solid business plan does which of the following?

A) forces potential entrepreneurs to look at their business idea in the harsh light of reality. B) requires a potential entrepreneur to assess the venture's chances of success more objectively. C) helps prove to outsiders, such as potential lenders and investors, that a business idea can be successful.

The three "tests" associated with a business plan are given by which of the combinations below?

A) reality, competitive, and value.

Which of the following is a special type of limited partnership in which all partners who, in many states must be considered to be professionals, are limited partners.

Although LLPs have many of the characteristics of partnerships, they are taxed as a corporation.

Which of the following is not one of the strategy areas for the business development program through which an owner can create his or her franchise prototype?

Building

Perhaps the ideal source of financing for the purchase of an existing business is which of the following?

C) the seller of the business.

Which of the following terms is also known as the "elevator pitch" and is written last, but is included as the first part of the business plan; it should summarize all the relevant points in about two pages.

D) executive summary.

Which of the following is a disadvantage of the corporation form of ownership?

Double taxation on profits.

A general partner is personally liable only for the amount of money he has invested in the partnership.

False

According to Theodore Levitt in the EMyth Revisited book, the difference between creativity and innovation is that innovation involves execution.

False

If a sole proprietorship fails, the owner is not liable for its debts since the business is a separate legal entity.

False

In a partnership, the business itself is subject to federal income tax.

False

Startup owners should only develop and focus on their pitch after they have a completed and vetted business plan.

False

The business development program through which an owner can create his or her franchise prototype is composed of five steps.

False

Which of the following is not one of the foundation activities for building a prototype of a business?

Franchising

The primary purpose of a business plan is to do which of the following?

Guide a company by charting its future course and devising a strategy for success.

Which of the following is not one of 'appropriate' reasons for writing a business plan?

It is a critical requirement to get positive reactions from potential investors.

Which of the following is not an advantage of the corporate form of ownership?

It is the easiest and least expensive form of ownership to create.

Which of the following is true about the preparation of a business plan?

The elements of the plan may be standard, but the content should reflect the unique aspects of the business and the excitement of the entrepreneur.

Carlos founded the "Taco Factory" 20 years ago as a family-oriented restaurant-over the years as they grew the business, he incorporated and sold stock to outside investors. Recently the stockholders voted to seek liquor licenses and to sell beer and hard liquor in the restaurants. Carlos opposed this, citing the history of the restaurant's "family" environment, but was voted down-Carlos has experienced which drawback of the corporate form of ownership?

The potential for diminished managerial incentives.

In the book EMyth Revisited the term 'Business Development Process' refers to which of the following?

The process of developing a prototype of the business.

The second essential purpose for creating a business plan is which of the following?

To attract lenders and investors.

Choosing S corporation status is usually beneficial to startup companies anticipating net losses and to highly profitable firms with substantial dividends to pay out to shareholders.

True

The section that describes "how to get there" and describes a competitive edge that sets the business apart is referred to as which of the following terms?

business strategy.

In which of the following forms of ownership does the business itself pay income taxes?

corporation

During the acquisition process, the potential buyer usually must sign which of the following, which is an agreement to keep all conversations and information secret and legally binds the buyer from telling anyone any information the seller shares with her.

covenant not to compete.

Advantages to buying an existing business that you do not have with a startup include which of the following?

inventory is in place and trade credit is established.

All of the following are advantages of a partnership except for which of the following?

partnerships have the greatest ability to accumulate capital of all of the forms of ownership

When done correctly, the due diligence process will do which of the following?

reveal both the positive and negative aspects of an existing business.

Marco is opening a new computer repair shop, he is owner and sole employee, he has paid the appropriate fees and licensing costs and begun his business; as a result this is an example of which of the following?

sole proprietorship

The most common form of business ownership that is also the simplest to create is which of the following?

sole proprietorship

The most critical disadvantage of the sole proprietorship is which of the following?

the owner's unlimited personal liability.

The key to choosing the right form of ownership involves which of the following?

understanding the characteristics of each form and knowing how they affect your business and personal circumstances.

Which of the following terms is a synonym for the 'primary aim' in the business program development process?

vision