Entrepreneurship

Use of debt to finance a new venture involves a payback of funds plus an interest fee for the use of the money.

true

Using the failure prediction model discussed in the chapter, the risk of failure can be reduced by:

using less debt as initial financing and generating revenue in the initial stages

All of the following are recognized as advantages of partnerships except:

lack of continuity

Name the pitfall described by the statement, "Engineers and technically trained people are particularly prone to falling in love with an idea for a product or service."

lack of objective evaluation

Major trends in the venture capital field today include all of the following except

less specialized and more homogenous funds

Specific forms of partnership include which of the following?

limited partnerships and limited liability partnerships

One of the advantages of public offerings is

liquidity

The main objective of Regulation D is to

make it easier and less expensive for small ventures to sell stock.

The registration of a trademark has a lifetime of

10 years plus 10-year renewable periods

The two parts of a patent application are specification and claims.

True

Three primary legal forms of organization are the sole proprietorship, the partnership, and the corporation.

True

An informal risk capitalist is referred to as:

a business angel.

The advantages of franchising include:

training and guidance. brand-name appeal. proven track record.

Which of the following does not represent a category of angel investors?

amateur angels

The individual who buys the franchise is the

franchisee

When a trademark becomes the name of a general group of products or services, the trademark protection may be lost because of

generic meaning

Which of the following are not trademarks?

generic words

Which of the following is an intangible asset?

goodwill

The type of venture that is expected to attract venture capital would most likely be a

high-growth venture.

Venture classifications include which of the following types of venture?

high-growth ventures

Works created after January 1, 1978, have a copyright for the life of the author plus

70 years

When considering bankruptcy, entrepreneurs as sole proprietors normally prefer

Chapter 13

It often is possible to obtain more capital and a better range of skills in a sole proprietorship than in a partnership.

False

Which is not a key question to ask when buying a business?

Is the building heated with gas or electricity?

From where does an S corporation take its name?

Subchapter S of the Internal Revenue Code

Which of the following statements is not true of venture capitalists?

They are interested in trying to manage firms themselves.

Works created and copyrighted after January 1, 1978, are protected for the life of the author plus 70 years.

True

The most common source of debt financing is

commercial banks

Which of the following terms is not synonymous with social lending?

commercially viable lending

Because of the _____ doctrine, it is sometimes difficult to establish infringement.

fair use

Overall market understanding rather than a time-consuming focus on market niches is sufficient for an evaluation.

false

Surprisingly, growth of sales is generally not considered a critical factor in assessing new ventures.

false

An approach developed as a criteria selection list from which entrepreneurs can gain insights into the viability of their venture is the

feasibility criteria approach.

Market feasibility analysis relies on

general economic trends and competitor data.

Private placement is a method of raising capital through the private placement of securities.

true

Sources of debt financing include trade credit, accounts receivables, factoring, and finance companies.

true

The elimination of time and effort associated with starting a company is an advantage of acquiring an ongoing venture.

true

The entrepreneurial motivations of individuals relate to the entrepreneur, the environment, and the venture.

true

The prospective investor should get as much information as possible on the franchisor.

true

When one designs a unique good or service, the individual is said to have used a(n) ____approach to starting the business.

new-new

Rapid technological advances in many industries cause a concern for __________ in new venture development.

rapid product obsolescence

There are two parts to a patent application, claims and

specification.

Who must negotiate a final deal to purchase a business?

the potential buyer

Which of the following is critical to a product's success?

timing marketing approach objectivity

An agreement not to compete is also known as

a legal restraint of trade.

The entrepreneur should ask the venture capitalist _____ questions.

an unlimited number of

When should a potential franchisee receive the FDD (Franchise Disclosure Document)?

at least ten days before signing a contract or paying any money

That part of a patent application which identifies the features that are protected is known as the

claim

Which of the following is a major reason for the failure of a new venture?

inadequate market knowledge

Many entrepreneurs lack _____ for their new venture.

objectivity

A key question to ask when buying an on-going small business is which of the following?

How many personnel are going to remain?

Laws governing intellectual property rights include copyrights, trademarks, and leases.

false

Most entrepreneurs are objective when they evaluate their new idea.

false

Most entrepreneurs are well schooled in the technology associated with their ventures.

false

The Federal Trade Commission does not provide information on franchise success.

false

The decision of an entrepreneur to ignore the market is a safe one if he or she is sure that the idea will be a success.

false

There is a great abundance of reliable data concerning the start-up, performance, and failure of new ventures.

false

To effectively pursue a patent violation, experts recommend that the entrepreneur

prepare a realistic budget for infringement.

Three specific phases that a new venture goes through are

prestart-up, start-up, poststart-up

Feasibility analyses include technical, market, financial, organizational, and competitive analyses.

true

Perhaps the greatest advantage of buying a franchise, as compared to starting a new business or buying an existing one, is that the franchisor will usually provide both training and guidance to the franchisee.

true

Solid analysis and evaluation of the feasibility of the product/service idea are critical tasks in starting a new business.

true

The Franchise Disclosure Document (FDD) is a legally required disclosure document that must be presented to potential franchisees during pre-sale discussions.

true

The terms upside gain and downside loss refer to the profits the business can make and the losses it can suffer.

true

Uniqueness in a product or service can be demonstrated through a new-new approach or a new-old approach.

true

The registration of a trademark lasts for 40 years, with continuous renewal every 10 years.

False

Which is an important question for the entrepreneur to ask when evaluating the venture capitalist?

Is the person someone with whom the entrepreneur can work?

Which of the following falls under Chapter 7 bankruptcy?

The debtor is relieved of obligations

Which of the following falls under Chapter 7 bankruptcy?

The debtor is relieved of obligations.

A copyright provides exclusive rights to creative individuals for the protection of their artistic productions

True

A trademark is a distinctive name, mark, or symbol that is identified with a company's product.

True

Which is one of the most important questions for entrepreneurs to ask regarding venture capitalists?

What is it like to work with their firm?

Which of the following is not a key question a prospective buyer needs to ask in buying a business?

What is the owner's personal net worth?

An additional consideration to keep in mind when negotiating to purchase an existing business includes requesting that the seller retain __________ in the firm.

a minority interest

All of the following are ways of invalidating a trademark except

clearing-out proceedings

Which of the following is a type of equity financing?

common stock

An advantage to buying an ongoing business is

concern over future operations. time and effort are reit may be purchased at a bargain price.

The owner of a copyright may do all of the following except

deduct the intrinsic value of the rights from one's taxes

Because the advantages of going public outweigh the disadvantages, it is in a corporation's best interest to go public.

false

Equity financing is money invested in the venture with legal obligations to repay the principal amount of interest or interest rate on it.

false

Franchisees have the option of using the logo and symbols of the franchisor.

false

A ____ is a system of distribution that enables a supplier to arrange for a dealer to handle a specific product or service under certain mutually agreed upon conditions.

franchise

Poor financial understanding is characterized by which of the following?

inadequate understanding of costs and funding requirements

The person who sells the franchise is usually required to do all of the following except:

pay a fee

A common pitfall in selecting a new venture is

poor financial understanding

Which of the following is not a type of debt financing?

private placement

Which of the following as a factor contributing to new-venture failure?

product/market problems

Advantages of debt financing include all of the following except:

regular interest payments

A disadvantage of debt financing is

regular interest payments.

The inventory should be examined for which of the following?

salability correspondence between the physical count and the book count up-to-datedness

The entrepreneurial motivations of individuals usually relate to which of the following factors?

the environment the entrepreneur the venture

In negotiating a deal to purchase an existing business, it is possible to request that the seller retain a minority interest in the firm.

true

Obtaining external financing is considered one of the major types of problems for a new venture during its first year.

true

When purchasing an existing business, the prospective owner should conduct an assessment of the business's current group of employees.

true