MGT 253 Exam 2
57) A tagline is a catchy phrase that's used consistently in a company's literature, advertisements, and even invoices and thus becomes associated with a company—to reinforce their position in the market.
Answer: TRUE
57) Historical financial statements reflect past performance and are usually prepared on a quarterly and annual basis.
Answer: TRUE
57) Prior entrepreneurial experience, relevant industry experience, and networking are attributes that strengthen the chances of a founder's success.
Answer: TRUE
57) The primary activities in a firm's value chain include: inbound logistics, operations, outbound logistics, marketing and sales, and service.
Answer: TRUE
57) Utility patents are the most common type of patent and cover what we generally think of as new inventions
Answer: TRUE
58) A brand is the set of attributes—positive or negative—that people associate with a company.
Answer: TRUE
58) A trademark is a word, name, symbol, or device used to identify the source or origin of products or services and to distinguish those products or services from others.
Answer: TRUE
58) Angel investors, private placement, venture capital, and initial public offerings are the most common sources of equity funding.
Answer: TRUE
58) Mediation is the process in which an impartial third party helps those involved in a dispute reach an agreement.
Answer: TRUE
58) Pro forma financial statements are projections for future periods based on forecasts and are typically completed for 2 to 3 years into the future.
Answer: TRUE
59) A narrow group of businesses are required to have a federal business license, including investment advising, drug manufacturing, and interstate trucking.
Answer: TRUE
59) Creating buzz means creating awareness and a sense of anticipation about a company and its offerings.
Answer: TRUE
59) Networking is building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm.
Answer: TRUE
59) The four components of an effective business model include: core strategy, strategic resources, partnership network, and customer interface.
Answer: TRUE
60) A skills profile is a chart that depicts the most important skills that are needed and where skills gaps exist.
Answer: TRUE
60) The income statement records all the revenues and expenses for a given period and shows whether the firm is making a profit or is experiencing a loss.
Answer: TRUE
61) A company's product/market scope defines the products and markets on which it will concentrate.
Answer: TRUE
61) A firm's profit margin, or return on sales, is computed by dividing net income by net sales.
Answer: TRUE
61) An increasingly important approach for recruiting employees is via social media sites like LinkedIn, Facebook, and Twitter.
Answer: TRUE
61) Most business angels remain fairly anonymous and are matched up with entrepreneurs through referrals.
Answer: TRUE
61) Trademark law falls under the Lanham Act, which passed in 1946.
Answer: TRUE
62) A disadvantage of a general partnership is that the liquidity of each partner's investment is low.
Answer: TRUE
62) A trademark consisting primarily of a surname, such as Jones or Smith, is typically not protectable.
Answer: TRUE
62) Although a board of directors has formal governance responsibilities, its most useful role is to provide guidance and support to the firm's managers.
Answer: TRUE
62) An important distinction should be made between a firm's core product and its actual product. While the core product may be a CD that contains an antivirus software program, the actual product may have a number of characteristics, include a quality level, features, design, a brand name, and packaging.
Answer: TRUE
62) Venture capital is money that is invested by venture capital firms in startups and small businesses with exceptional growth potential.
Answer: TRUE
63) A copyright is a form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work.
Answer: TRUE
63) A core competency is a resource or capability that serves as a source of a firm's competitive advantage over its rivals.
Answer: TRUE
63) A referent account is an early user of a firm's product who is willing to give a testimonial regarding his or her experience with the product.
Answer: TRUE
63) An advisory board is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.
Answer: TRUE
63) The major categories of assets listed on a balance sheet include current assets, fixed assets, and other assets.
Answer: TRUE
63) The major difference between a general and a limited partnership is that a limited partnership includes two classes of owners: general partners and limited partners.
Answer: TRUE
63) The percentage of the profits the venture capitalist gets is called the "carry."
Answer: TRUE
64) Price is the only element in the marketing mix that produces revenue; all other elements represent costs.
Answer: TRUE
64) The 1976 Copyright Revision Act governs copyright law in the United States.
Answer: TRUE
64) The process of adapting a company's core competencies to exploit new opportunities is referred to as resource leverage.
Answer: TRUE
65) An advisory board can be established for general purposes or can be set up to address a specific need.
Answer: TRUE
65) In value-based pricing, the list price is determined by estimating what customers are willing to pay for a product and then backing off a bit to provide a cushion.
Answer: TRUE
65) It is usually easier for a corporation to raise investment capital than a sole proprietorship or a general partnership because the shareholders are not liable beyond their investment in the firm.
Answer: TRUE
65) Strategic assets are anything rare and valuable that a firm owns.
Answer: TRUE
65) The statement of cash flows summarizes the changes in a firm's cash position for a specified period of time and details why the change occurred.
Answer: TRUE
66) Because of the weaknesses associated with advertising, most startups do not advertise their products broadly.
Answer: TRUE
66) Companies ultimately try to combine their core competencies and strategic assets to create a sustainable competitive advantage.
Answer: TRUE
66) Copyright infringement occurs when one work derives from another or is an exact copy.
Answer: TRUE
67) A trade secret is any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage in the marketplace.
Answer: TRUE
67) Stock options are a special form of incentive compensation.
Answer: TRUE
67) The break-even point for a new restaurant or product is the point where the total revenue received equals total costs associated with the output of the restaurant or the sale of the product.
Answer: TRUE
68) A lease is a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments.
Answer: TRUE
68) A network is a hub-and-wheel configuration with a local firm at the hub organizing the interdependencies of a complex array of firms.
Answer: TRUE
68) A subchapter S corporation combines the advantages of a partnership and a C corporation.
Answer: TRUE
68) The federal Economic Espionage Act, passed in 1996, criminalizes the theft of trade secrets.
Answer: TRUE
68) The pro forma balance sheet provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time.
Answer: TRUE
69) A firm's target market is the limited group of individuals or businesses that it goes after or tries to appeal to.
Answer: TRUE
69) Consultants fall into two categories: paid consultants and consultants who are made available for free or at a reduced rate through a nonprofit or government agency.
Answer: TRUE
69) Social plugins are tools that Web sites can use to provide users with personalized social experiences.
Answer: TRUE
69) The SBIR and STTR programs are two important sources of early stage funds for technology firms.
Answer: TRUE
70) A firm's sales process depicts the steps it goes through to identify prospects and close sales.
Answer: TRUE
70) An intellectual property audit is conducted to determine the intellectual property a company owns.
Answer: TRUE
70) Fulfillment and support describes the way a firm's product or service "goes to market" or how it reaches its customers.
Answer: TRUE
70) The same financial ratios used to evaluate a firm's historical financial statement should be used to evaluate the pro forma financial statements.
Answer: TRUE
16) Some companies monitor the integrity of their brands through a program of: A) brand administration B) brand persistence C) brand determination D) brand resolution E) brand management
Answer: E
16) Which of the following is not a source of equity funding? A) initial public offering B) angel investors C) private placement D) venture capital E) government grants
Answer: E
56) The idea that it's important to get "everything in writing" in regard to business agreements causes unnecessary work and can lead to an erosion of trust between business partners.
Answer: FALSE
57) Debt financing means exchanging partial ownership in a firm in exchange for cash.
Answer: FALSE
58) Relevant industry experience is a poor predictor of future entrepreneurial performance.
Answer: FALSE
58) Two fatal flaws can render a business model untenable from the beginning: a complete misread of the customer and underutilization of the Internet.
Answer: FALSE
59) Certification marks are similar to ordinary trademarks, but they are used to identify the services or intangible activities of a business rather than a business's physical product.
Answer: FALSE
59) The balance sheet reflects the results of the operations of a firm over a specified period of time.
Answer: FALSE
59) Venture capitalists are individuals who invest their personal capital directly in startups.
Answer: FALSE
60) "Brand premium" is the term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm's valuations
Answer: FALSE
60) Choosing a legal entity for a firm is a one-time event. Once a form of legal entity has been chosen, it cannot be changed.
Answer: FALSE
60) Combinations of numbers and letters, such as 3M and 1-800-FREE-411, cannot be trademarked.
Answer: FALSE
60) Fortunately, if three of the four components of a firm's business model are in place, the firm has a high probability of success.
Answer: FALSE
60) The number of angel investors in the United States has decreased dramatically over the past decade.
Answer: FALSE
61) A disadvantage of a sole proprietorship is that it is subject to double taxation.
Answer: FALSE
61) A firm's marketing mix is the assortment of products and services that it sells.
Answer: FALSE
62) A statement of cash flows is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time.
Answer: FALSE
62) Historically, it has been difficult for a new venture to use a differentiation strategy.
Answer: FALSE
64) A firm's working capital is defined as its fixed assets minus its long-term liabilities.
Answer: FALSE
64) Corporations are organized as either C Corporations, T Corporation, or subchapter S corporations.
Answer: FALSE
64) Similar to a board of directors, an advisory board possesses legal responsibility for the firm.
Answer: FALSE
64) Venture capital involves getting a loan or selling corporate bonds.
Answer: FALSE
65) Computer software is not covered by copyright law.
Answer: FALSE
65) Historically, commercial banks have been viewed as an excellent source of financing for startup firms.
Answer: FALSE
66) Approximately 80 percent of the 9,000 banks in the United States participate in the SBA Guaranteed Loan Program.
Answer: FALSE
66) In the context of a firm's statement of cash flows, operating activities include the purchase, sale, or investment in fixed assets, such as real estate, equipment, and buildings.
Answer: FALSE
66) The fact that a corporation has a board of directors precludes it from having a board of advisors.
Answer: FALSE
66) The vast majority of corporations in the United States are public corporations.
Answer: FALSE
67) A resource chain is the network of all the companies that participate in the production of a product, from the acquisition of raw materials to the final sale.
Answer: FALSE
67) Crowdfunding is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash.
Answer: FALSE
67) Most boards of advisers have between 3 and 5 members.
Answer: FALSE
67) The Google AdWords program allows advertisers to buy ads that will be shown on other Web sites instead of Google's Home Page.
Answer: FALSE
68) Many startups emphasize advertising over public relations primarily because it's cheaper and helps build the firm's credibility.
Answer: FALSE
68) More people are willing to serve on a company's board of directors than board of advisors.
Answer: FALSE
69) Few entrepreneurial firms start as subchapter S corporations.
Answer: FALSE
69) The pro forma income statement shows the projected flow of cash into and out of the company during a specified period.
Answer: FALSE
69) Trade secret disputes arise most frequently when one firm alleges that a trade secret claimed by another firm is common knowledge, and can therefore be used by anyone.
Answer: FALSE
70) Historically, the vast majority of SBIR Phase 1 proposals are approved.
Answer: FALSE
70) SCORE is a for-profit organization that provides consulting services to small businesses.
Answer: FALSE
70) The limited liability corporation is a form of business organization that is rapidly losing popularity in the United States.
Answer: FALSE
51) A firm's target market is the limited group of individuals or businesses that it goes after or tries to appeal to.
Answer: TRUE
51) A new venture team is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm.
Answer: TRUE
51) Financial management deals with two things: raising money and managing a company's finances in a way that achieves the highest rate of return.
Answer: TRUE
51) Intellectual property is any product of human intellect that is intangible but has value in the marketplace.
Answer: TRUE
51) The single most important thing the founders of an entrepreneurial venture can do to avoid ethical misconduct is to establish a strong ethical culture for their firms.
Answer: TRUE
51) There are three reasons that most firms need to raise money during their early life: cash flow challenges, capital investments, and lengthy product development cycles.
Answer: TRUE
52) The term "liability of newness" refers to the fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firms lack "track records" with outside buyers and suppliers.
Answer: TRUE
53) A patent is a grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for the term of the trademark.
Answer: TRUE
53) Almost all firms partner with others to make their business models work.
Answer: TRUE
53) An ethical dilemma is a situation that involves doing something that is beneficial to oneself or the organization, but may be unethical.
Answer: TRUE
53) Markets can be segmented in a number of ways, including by product type, price point, distribution channel used, and customers served.
Answer: TRUE
53) The vast majority of founders contribute personal funds along with sweat equity to their ventures.
Answer: TRUE
54) A company's accounts receivable is money owed to it by its customers.
Answer: TRUE
54) A niche market is a place within a market segment that represents a narrow group of customers with similar interests.
Answer: TRUE
54) It is important for an entrepreneur to select an attorney as early as possible when developing a business venture.
Answer: TRUE
54) There are three common sources of "personal" financing for a startup firm: personal funds, friends and family, and bootstrapping.
Answer: TRUE
54) There is no standard business model that dictates how firms in a particular industry should compete.
Answer: TRUE
55) A clearly articulated business model articulates a company's core logic to all stakeholders, including the firm's employees.
Answer: TRUE
55) A firm's "position" is concerned with how it is situated relative to its rivals.
Answer: TRUE
55) A founders' agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm.
Answer: TRUE
55) Bootstrapping is the use of creativity, ingenuity, and any means possible to obtain resources other than borrowing money or raising capital from traditional sources.
Answer: TRUE
55) Founding teams that have worked together before, as opposed to teams that are working together for the first time, have an edge.
Answer: TRUE
55) If a firm's debt-to-equity ratio gets too high, it may have trouble meeting its obligations and securing the level of financing needed to fuel its growth.
Answer: TRUE
56) Budgets are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control.
Answer: TRUE
56) By studying a product's value chain, an organization can identify ways to create additional value and assess whether it has the means to do so.
Answer: TRUE
56) The ideal candidate for a bank loan is a firm with a strong cash flow, low leverage, audited financial statements, good management, and a healthy balance sheet.
Answer: TRUE
57) A noncompete agreement prevents an individual from competing against a former employer for a specific period of time.
Answer: TRUE
56) A product attribute map illustrated the strength of a firm's niche (or target) market relative to competing markets.
Answer: FALSE
56) A utility patent can be obtained for a new product or process or the "idea" for a new product or process.
Answer: FALSE
32) Which element of the marketing mix is the only one that produces revenue? A) product B) place (or distribution) C) advertising D) price E) promotion
Answer: D
12) Southwest Airlines uses its assets very productively. Its turnaround time, or the time that its airplanes sit on the ground while they are being loaded and unloaded, is the lowest in the airline industry. In terms of the primary financial objectives of a firm, this attribute is a measure of Southwest's: A) efficiency B) effectiveness C) stability D) liquidity E) profitability
Answer: A
1) Klymit, the company profiled in the opening feature in Chapter 8, makes cold weather apparel products and related accessories. According to the feature, one of the prominent challenges Klymit has faced is: A) cash flow management B) constructing realistic pro forma financial statements C) defining its core strategy D) hiring qualified personnel E) finding reliable partners
Answer: A
11) A ________ illustrates a firm's positioning strategy relative to its major rivals. A) product attribute map B) positioning analysis grid C) positioning plot D) competitive analysis grid E) positioning diagram
Answer: A
11) The sole entity responsible for granting patents in the United States is the: A) U.S. Patent and Trademark Office B) Federal Patent, Copyright and Trademark Office C) Securities and Exchange Commission D) U.S. Departments of Patents E) U.S. Treasury Department
Answer: A
11) Which of the following is typically not included in the founders' agreement for a firm? A) marketing plan B) legal form of business ownership C) buyback clause D) apportionment of stock E) identity and proposed titles of the founders
Answer: A
12) According to the textbook, by studying a product's or service's value chain an organization can: A) identify ways to create additional value and assess whether it has the means to do so B) determine if its business plan needs to be revised C) determine if it is cost effective to manufacture the product or sell the service D) determine if an attractive niche market is available E) determine if a product or service will be successful in the marketplace
Answer: A
12) Bill and Megan Tempelton are planning to open a smoothie restaurant near a large soccer complex in Greeley, Colorado, and need $75,000 to get started. They have $15,000 of their own money, which leaves $60,000. After getting turned down by a couple of banks, they decided to turn to their relatives and acquaintances for help. Fortunately, they were able to raise the money through a gift from Bill's grandfather, a loan from Megan's parents, and a small investment by Bill's best friend in college, Kevin. The money that an entrepreneur raises in this manner is referred to as: A) friends and family B) bootstrapping C) networking money D) compassion money E) legacy money
Answer: A
12) The members of heterogeneous teams are: A) diverse in terms of their abilities and experiences B) diverse in terms of their abilities, but very similar in terms of their experiences C) similar in terms of their abilities and experiences D) diverse in terms of their experiences, but very similar in terms of their abilities E) sometimes diverse in terms of their abilities and experiences and sometimes similar along the same dimensions
Answer: A
14) A(n) ________ agreement binds an employee or another party to not disclose a company's trade secret. A ________ agreement prevents an individual from competing against a former employer for a specific period of time. A) nondisclosure, noncompete B) non breach-of-trust, nonchallenge C) voluntary truth, nonparticipate D) binding confidentiality, noncompete E) ethics, nonparticipate
Answer: A
14) According to the textbook, which of the following statements is inaccurate regarding the size and composition of the founding team of a firm? A) There is no relationship between a founding team's size and its effectiveness. B) A founding team larger than four people is typically too large to be practical. C) The members of a homogeneous founding team are similar in terms of their abilities and experiences. D) The members of a heterogeneous founding team are diverse in terms of their abilities and experiences. E) A founding team can be too big, causing communication problems and increasing potential for conflict.
Answer: A
14) InstyMed's phrase "We make patients better quicker" is an example of a(n): A) tagline B) grabline C) notice-line D) catchline E) attention-line
Answer: A
15) Equity financing (or funding) means: A) exchanging partial ownership in a firm, usually in the form of stock, for funding B) getting a grant or outright gift C) getting a loan D) getting a lease E) getting a loan guarantee
Answer: A
15) Trevor Parsons just took a job with Twitter. As part of his employment contract, Trevor signed an agreement that states that he will not disclose any of Twitter's trade secrets. The agreement that Trevor signed is called a(n): A) nondisclosure agreement B) non breach-of-trust agreement C) ethics agreement D) binding confidentiality agreement E) legitimacy agreement
Answer: A
17) The What Went Wrong feature in Chapter 11 focuses on Ugobe, the company that made Pleo, a small robotic baby dinosaur. Ugobe failed primarily because it didn't establish a clear: A) positioning strategy B) branding strategy C) social media strategy D) financial strategy E) advertising strategy
Answer: A
17) Two fatal flaws can render a business model untenable from the beginning. These are utterly unsound economics and: A) a complete misread of the customer B) failure to copy the industry leader's business plan C) overemphasis on the importance of feasibility analysis D) overemphasis on the importance of industry analysis E) failure to complete a business plan prior to developing a business model
Answer: A
18) Which of the following statements regarding business licenses and permits is incorrect? A) Most business licenses and permits can wait until after a business is launched to be obtained. B) A business license can be obtained at the city clerk's office in the community where the business will be located. C) If a business will be run out of a home, a home occupation business license is often required. D) Some business licenses are hard to get. E) The business licenses and permits that are needed vary by city, county, and state.
Answer: A
19) Ned Kite is a four time business owner. One thing that has served Ned well throughout his entrepreneurial career is his ability to build and maintain relationships with people whose interests are similar or whose relationships could bring advantages to his new ventures. According to the textbook, Ned is a good: A) networker B) socializer C) linker D) assembler E) connector
Answer: A
2) The opening feature in Chapter 6 focuses on Stroome, an exciting new Web-based service for editing and remixing video. The idea for Stroome emerged in: A) a graduate communications class at the University of Southern California B) a student-run incubator at the University of Illinois C) a technology commercialization class at Cornell D) a city-owned new business incubator in Cleveland E) a business plan class at Kansas State
Answer: A
20) The Partnering for Success feature in Chapter 8 focuses on buying groups, and recommends that small businesses seek out buying groups to participate in. What is a "buying group" in the context of the feature? A) a partnership that bands small businesses together to attain volume discounts on common products and services that they buy B) a partnership that bands small businesses together to collectively make the commitment to "buy local" at every available opportunity C) a partnership that bands small businesses together to get the best prices possible from foreign importers and manufacturers D) a partnership that bands small businesses together to get the best possible terms from finance companies E) a partnership that bands small businesses together to get the best possible rates on property and liability insurance
Answer: A
20) The What Went Wrong? feature in Chapter 6 focuses on Joost, a company that launched in 2006 as a premier online video service that aggregated and streamed premium video online. Joost failed just three years after it launched. According to the feature, Joost's most critical mistake dealt with subtle aspects of its business model. In particular, its: A) core strategy wasn't focused B) pricing model was misguided C) partnership network never came together D) customer interface was poorly conceived E) customer service strategy was poorly executed
Answer: A
21) Jason Andersen just finished writing a business plan for a new type of office supply store. One thing Jason included in the "Management Team & Company Structure" section of his business plan is a chart that depicts the most important skills that are needed for his business and where skills gaps exist. Jason included a(n)________ in his business plan. A) skills profile B) talent report C) abilities profile D) expertise report E) talent summary
Answer: A
21) Jeff Mommer is starting an environmentally friendly lawn and garden service. One thing that Jeff has worked hard on is determining how his company will compete in the marketplace. This element of Jeff's business model is referred to as: A) core strategy B) strategic resources C) partnership network D) fulfillment and support E) customer interface
Answer: A
22) The simplest form of business entity is the: A) sole proprietorship B) general partnership C) C Corporation D) limited liability company E) subchapter S corporation
Answer: A
22) There are four types of trademarks: A) trademarks, service marks, collective marks, and certification marks B) examination marks, trademarks, combined marks, and service marks C) shared marks, collective marks, mutual marks, and trademarks D) service marks, cooperative market, trademarks, and shared marks E) trademarks, collective marks, documentation marks, and combined marks
Answer: A
23) Steven Tanner is in the process of putting together the business model for his startup and is currently working on his mission statement, product/market scope, and basis for differentiation. Steven is working on the ________ component of his business model. A) core strategy B) strategic resources C) partnership network D) customer interface E) feasibility analysis
Answer: A
23) The Savvy Entrepreneurial Firm feature in Chapter 9 focuses on how business founders overcome a lack of business experience. Which of the following was not mentioned as a practical way for a new business founder to overcome a lack of business experience? A) hiring consultants from a major consulting firm, like Bain & Company or McKinsey & Company B) taking on a partner that has business experience C) getting help from a Small Business Development Center D) joining a Meetup group E) participating in online forums
Answer: A
24) A firm's ________ describes why it exists and what its business model is supposed to accomplish. A) mission statement B) vision statement C) feasibility statement D) duty statement E) responsibility statement
Answer: A
24) Which of the following selections correctly matches the financial statement with its description? A) income statement/tells how much a firm is making or losing B) income statement/depicts the structure of a firm's assets and liabilities C) balance sheet/shows where a firm's cash is coming from D) balance sheet/tells how much a firm is making or losing E) statement of cash flows/depicts the structure of a firm's assets and liabilities
Answer: A
26) A firm's marketing mix consists of the following four elements: A) product, price, promotion, and place B) passion, pride, promotion, and place C) passion, pleasure, product, and price D) enthusiasm, passion, product, and price E) place, promotion, passion, and product
Answer: A
26) A(n) ________ details the responsibilities and the ownership shares of the partners involved with an organization. A) partnership agreement B) industry contract C) business pledge D) business agreement E) partnership pledge
Answer: A
26) ________ are limited partnerships of money managers who raise money in "funds" to invest in startups and growing firms. A) Venture capital firms B) Business angels C) Institutional investors D) Investment bankers E) Business capitalists
Answer: A
26) ________ are trademarks or service marks used by the members of a cooperative, association, or other collective group, including marks indicating membership in a union or similar organization. A) Collective marks B) Share marks C) Examination marks D) Joint marks E) Certification marks
Answer: A
27) Venture capital firms are ________ of money managers who raise money in "funds" to invest in startups and growing firms. A) limited partnerships B) finance associations C) consortiums D) collations E) strategic partnerships
Answer: A
28) A ________ is something that takes on a physical form, such as an MP3 player or a laptop computer. A ________ is an activity or benefit that is intangible, such as an airplane trip or advice from an attorney. A) product, service B) service, component C) component, service D) formation, service E) service, product
Answer: A
29) A firm's profit margin, or return on sales, is computed by dividing: A) net income by net sales B) gross profit by net sales C) net income by gross profit D) net income by cost of sales E) operating income by gross profit
Answer: A
29) A trademark is renewable: A) every 10 years, as long as the mark remains in use B) indefinitely, regardless of whether the mark remains in use C) every 20 years from the date of application for the trademark D) every 3 years E) every 33 years
Answer: A
29) According to a source cited in the textbook, venture capitalists anticipate that the percentage of investments that will be home runs is about ________ or less. A) 20 percent B) 50 percent C) 5 percent D) 33 percent E) 45 percent
Answer: A
31) In the context of boards of directors, a(n) ________ is someone who is not employed by the firm. A) outside director B) inside director C) external director D) impartial director E) peripheral director
Answer: A
31) The amount of money consumers pay to buy a product is its: A) price B) fee C) value D) cost E) charge
Answer: A
32) In regard to the stages (or rounds) of venture capital funding, the stage of funding that occurs when an investment is made very early in a venture's life to fund the development of a prototype and feasibility analysis is referred to as: A) seed funding B) second-stage funding C) first-stage funding D) mezzanine financing E) startup funding
Answer: A
32) James Williams is the Chief Operating Officer of a startup in the health food industry. He is also a member of his firm's board of directors. In board of directors terminology, James is a(n): A) inside director B) outside director C) expert director D) junior director E) senior director
Answer: A
33) In ________, the list price of an item is determined by adding a markup percentage to a product's cost. A) cost-based pricing B) compliance-based pricing C) value-based pricing D) competitive-based pricing E) economic-based pricing
Answer: A
35) In ________, the list price is determined by estimating what consumers are willing to pay for a product and then backing off a bit to provide a cushion. A) value-based pricing B) tactical pricing C) strategic pricing D) cost-based pricing E) economic-based pricing
Answer: A
36) ________ is the process of adapting a firm's core competencies to exploit new opportunities. A) Resource leverage B) Capacity proficiency C) Ability leverage D) Aptitude embellishment E) Capacity extension
Answer: A
37) According to the textbook, most experts recommend ________ pricing because it hinges on the perceived value of a product or service. A) value-based B) cost-based C) competitive-based D) tactical E) strategic
Answer: A
37) Which of the following statements is incorrect regarding boards of directors? A) If a new venture organizes as a corporation, it is not legally required to have a board of directors, but it is strongly recommended. B) A board is typically made up of both inside and outside directors. C) The board is responsible for declaring dividends. D) Most boards meet formally three or four times a year. E) The boards for publicly traded companies are required by law to have audit and compensation committees.
Answer: A
38) According to the textbook, although a board of directors has formal governance responsibilities, its most useful role is to: A) provide guidance and support to the firm's managers B) submit papers on behalf of the firm to the SEC C) represent the firm in public relations activities D) conduct the firm's annual meeting E) provide funding to the firm
Answer: A
38) Karen Simon recently purchased a digital camera. She considered three cameras, a Kodak that was priced at $139.00, a Panasonic priced at $189.00, and a Nikon priced at $229.00. Karen couldn't tell much difference between the cameras, so she bought the Nikon, figuring that because it was the most expensive of the three, it must be the best. According to the textbook, Karen was making a: A) price-quality attribution B) price-merit attribution C) cost-value acknowledgement D) cost-worth attribution E) price-worth acknowledgement
Answer: A
38) Which of the following statements is incorrect regarding common stock? A) Common stock is issued more narrowly than preferred stock. B) The common stockholders have voting rights. C) The common stockholders get paid after the creditors in the event of the liquidation of the corporation. D) Common stock is the form of stock that most shareholders of a corporation own. E) The common stockholders elect the board of directors.
Answer: A
39) The main exclusion from copyright laws is that copyright laws cannot protect: A) ideas B) dramatic works C) computer software D) musical compositions E) literary works
Answer: A
4) According to Chapter 7, which of the following forms of misconduct or unethical behavior was observed by the highest percentage of the U.S. workforce? A) company resource abuse B) employee privacy breach C) health or safety violations D) lying to outside stakeholders E) discrimination
Answer: A
4) In regard to business models, which of the following statements is incorrect? A) There is a standard business model that most firms follow. B) A firm's business model is inherently dependent on the collection of resources it controls and the capabilities it possesses. C) It is dangerous for a company to assume that it can be successful by simply copying the business model of another firm. D) A firm's business model is its plan or diagram for how it competes. E) It is often difficult to determine what another firm's business model is.
Answer: A
4) The three reasons startups need funding are: A) cash flow challenges, capital investments, and lengthy product development cycles B) business research, cash flow challenges, and costs associated with building a brand C) bonuses for members of the new venture team, attorney fees, and lengthy product development cycles D) attorney fees, capital investments, and marketing research E) bonuses for members of the new venture team, marketing research, and personnel costs
Answer: A
40) A disadvantage of corporations is that they are subject to ________, which means that a corporation is taxed on its net income and when the same income is distributed to shareholders in the form of dividends it is taxed again on shareholders' personal income tax returns. A) double taxation B) dual toll C) double duty D) double assessment E) dual harm
Answer: A
40) ________ occurs when one work derives from another or is an exact copy or shows substantial similarity to the original work. A) Copyright infringement B) Copyright violation C) Copyright intrusion D) Copyright breach E) Copyright duplication
Answer: A
41) Which of the following was not identified in the textbook as an attribute of an effective board of directors? A) homogeneous set of experiences and talents B) customer-focused point of view C) ability and willingness to stand up to the CEO and top managers of the firm D) strong communication with the CEO E) decisiveness
Answer: A
41) ________ is a financial transaction whereby a business sells its accounts receivable to a third party at a discount in exchange for cash. A) Factoring B) Vendor credit C) Peer-to-peer lending D) Crowdfunding E) Leasing
Answer: A
42) Every year thousands of electronic products manufacturers gather in Las Vegas to display their products and to see what their competitors are up to. This type of event is called a: A) trade show B) promotions show C) deal show D) goods show E) skill show
Answer: A
43) ________ include marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, and laboratory notebooks. A) Trade secrets B) Trademarks C) Collective marks D) Patents E) Copyrights
Answer: A
44) The idea behind blogs is that they: A) familiarize people with a business and help build an emotional bond between a business and its customers B) are an effective recruiting tool and they help businesses network with government officials C) help build an emotional bond between a business and its customers and are an effective platform for product development D) are an effective tool for product development and familiarize people with a business E) are an effective tool for recruiting and they familiarize people with a business
Answer: A
45) In the context of computing the cost of sales, the common way to do this is to use the percent-of-sales method, which is a method for expressing: A) each expense item as a percentage of net sales B) each expense item as a percentage of gross profit C) each expense item as a percentage of net income D) each expense item as a percentage of operating income E) each expense item as a percentage of cost of sales
Answer: A
45) The Partnering for Success feature in Chapter 11 focuses on Moxsie, an online retailer that sells fashion items made by independent designers. Moxsie has accelerated its growth by: A) partnering with an influential Web site and soliciting feedback from customers B) running Google AdSense ads and soliciting feedback from customers C) utilizing viral marketing and putting in place a formal sales process D) utilizing guerrilla marketing techniques and entering into a strategic alliance with Google E) co-branding its site with another online retailer and putting a formal sales process in place
Answer: A
45) Which of the following is a disadvantage of a C Corporation? A) Income is subject to double taxation. B) limited liability C) Raising capital is easier than a partnership or sole proprietorship. D) Stock is liquid if traded on a major stock exchange. E) No restrictions exist on the number of shareholders.
Answer: A
46) Which "phase" of the SBIR Program is intended to demonstrate the proposed innovation's technical feasibility? A) Phase I B) Phase II C) Phase III D) Phase V E) Phase X
Answer: A
47) A ________ combines the advantages of a partnership and a C corporation. A) subchapter S corporation B) limited partnership C) general partnership D) sole proprietorship E) subchapter K corporation
Answer: A
47) In a business model context, the three components of a firm's customer interface are target customer, fulfillment and support, and: A) pricing structure B) product/market scope C) basic for differentiation D) strategic assets E) business mission
Answer: A
47) Which of the following statements about advisory boards is incorrect? A) If a firm has a board of directors it is not permitted to have an advisory board. B) Many people are more willing to serve on a company's board of advisors than its board of directors because it requires less time and there is no potential legal liability involved. C) Most boards of advisers have between 5 and 15 members. D) A growing number of startups are forming advisory boards. E) An advisory board can be established for general purposes or can be set up to address a specific issue or need.
Answer: A
48) According to the textbook, most boards of advisers have between: A) 5 and 15 members B) 2 and 4 members C) 10 and 18 members D) 2 and 3 members E) 4 and 7 members
Answer: A
48) An ________ is conducted to determine the intellectual property a company owns. A) intellectual property audit B) intangible materials audit C) academic property inventory D) intellectual materials inventory E) intangible property inventory
Answer: A
48) The Savvy Entrepreneurial Firm feature for Chapter 8 focuses on Wise Acre Frozen Treats, a company that made organic popsicles from unrefined sweeteners. According to the feature, Wise Acre Frozen Treats failed largely because: A) it grew too quickly, which overwhelmed its cash flow B) it was not careful enough in preparing its pro forma financial statements C) it was not efficient in the way it utilized its assets D) it spent too much money on marketing E) it did not compare its financial ratios to industry peers
Answer: A
48) Which of the following is not one of the standards that a business must meet to qualify for status as a subchapter S corporation? A) The business must be a subsidiary of another corporation. B) All shareholders must agree to have the corporation formed as a subchapter S corporation. C) It can have no more than 100 members (husbands and wives count as one member). D) It can have only one class of stock issued and outstanding. E) The shareholders must be U.S. citizens.
Answer: A
49) The ________ provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time. A) pro forma balance sheet B) pro forma statement of cash flows C) pro forma income statement D) pro forms expense statement E) pro forma statement of owners' equity
Answer: A
49) Which of the following statements is incorrect about grant programs? A) Granting agencies are very visible and well-known, so it's normally not hard to find one. B) The federal government has grant programs beyond the SBIR and STTR programs. C) It's important to avoid grant-related scams. D) There are a limited number of organizations that offer new businesses grants. E) There are private foundations that grant money to both existing and startup firms.
Answer: A
5) In startup firms, inventory must be purchased, employees must be trained and paid, and advertising must be paid for before cash is generated from sales. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? A) cash flow challenges B) marketing costs C) personnel costs D) capital investments E) lengthy product development cycles
Answer: A
5) Match the financial objective with its correct definition. A) stability/the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio B) profitability/how productively a firm utilizes its assets C) liquidity/a company's ability to make a profit D) efficiency/a company's ability to meet its short-term obligations E) profitability/the overall health of the financial structure of the firm, particularly as it relates to its debt-to-equity ratio
Answer: A
6) A ________ is a formal statement of an organization's values on certain ethical and social issues. A) code of conduct B) code of behavior C) code of performance D) code of principles E) code of morals
Answer: A
6) ________ is a company's ability to meet its short-term financial obligations. A) Liquidity B) Profitability C) Effectiveness D) Stability E) Efficiency
Answer: A
7) A company's ability to productively utilize its assets relative to its revenue and its profits is referred to as: A) efficiency B) effectiveness C) stability D) liquidity E) profitability
Answer: A
7) Which of the following are the four key forms of intellectual property protection? A) patents, copyrights, trademarks, and trade secrets B) discoveries, covenants, trademarks, patents C) patents, official documents, copyrights, inventions D) discoveries, Internet domain names, innovations, trademarks E) convents, inventions, opportunities, and copyrights
Answer: A
7) Which of the following is not one of the purposes of a business model? A) serves as an ongoing extension of feasibility analysis B) serves as a template for conducting industry analysis C) focuses attention on how all the elements of a business fit together D) describes why the network of participants needed to make a business idea viable is willing to work together E) articulates a company's core logic to all stakeholders
Answer: A
9) Amanda Still owns a seafood restaurant in Clearwater, Florida. She is currently owed $19,000 by a corporation that she catered a meeting for and $2,000 on an overdue account. Amanda has $21,000 in: A) accounts receivable B) inventory C) accounts collectable D) accounts obtainable E) accounts payable
Answer: A
9) The What Went Wrong feature in Chapter 9 focuses on Deever, a 2008 startup that helped software developers use cloud-based services to "test" their code in an expedient manner. According to the feature, one of the primary reasons Deever failed was: A) it lacked a cofounder who loved the business side of running a startup B) the cofounders couldn't get along C) it didn't build a robust partnership network D) it didn't solicit advice from attorneys, bankers or business consultants E) it didn't have a Board of Advisors
Answer: A
1) Stroome, the focus on the opening feature for Chapter 6, has developed a new Web-based service for editing and remixing video. Stroome's initial business model is based on making money in the following two ways: A) subscription fees and licensing its software to film producers B) a "freemium" pricing model and white labeling its site C) online advertising and affiliate fees D) white labeling its site and subscription fees E) Google AdSense and affiliate fees
Answer: B
10) Most founders' agreements include a ________, which legally obligates the departing founder to sell to the remaining founders his or her interest in the firm if the remaining founders are interested. A) redemption clause B) buyback clause C) statutory purchase clause D) voluntary recoup clause E) shareholder surrender clause
Answer: B
10) Which form of intellectual property protection is the only one expressly mentioned in the original articles of the U.S. Constitution? A) assurances B) patents C) copyrights D) trade secrets E) trademarks
Answer: B
11) Which of the following statements is incorrect regarding founding teams? A) The members of heterogeneous teams are diverse in terms of their abilities and experiences. B) Teams that are working together for the first time have an advantage over teams that have worked together before. C) The psychological support that cofounders of a new business can offer one another is an important element of a firm's success. D) The members of homogeneous teams are very similar in terms of their abilities and experiences. E) Studies show that more than one individual starts 50 to 70 percent of all new teams.
Answer: B
13) Nike's familiar phrase "Just do it" is an example of a(n): A) attention-line B) tagline C) notice-line D) catchline E) grabline
Answer: B
13) Two fatal flaws can render a business model untenable from the beginning. These are: A) failure to complete a business plan and failure to get funding B) a complete misread of the customer and utterly unsound economics C) failure to copy the industry leader's business plan and a complete misread of the customer D) failure to complete a business plan and overemphasizing the importance of feasibility analysis E) overemphasizing the importance of feasibility analysis and utterly unsound economics
Answer: B
15) ________ are an estimate of a firm's future income and expenses, based on its past performance, its current circumstances, and its future plans. A) Calculation statements B) Forecasts C) Statements of cash flow D) Financial statements E) Prediction statements
Answer: B
18) In regard to budgets, which of the following statements is not true? A) Budgets include an itemized forecast of a company's expenses. B) Budgets are a poor tool for financial control. C) Budgets are an important tool for financial planning. D) Budgets include an itemized forecast of a company's capital needs. E) Budgets include an itemized forecast of a company's income.
Answer: B
18) The four components of a firm's business model are: A) marketing plan, core strategy, business plan, and customer interface B) core strategy, strategic resources, partnership network, and customer interface C) economic environment, social environment, technological environment, and legal-regulatory environment D) opportunity recognition, feasibility analysis, business plan, and human resource plan E) marketing plan, operating plan, financial plan, and human resource plan
Answer: B
2) According to the textbook, many entrepreneurs go about the task of raising capital haphazardly because: A) they are uncomfortable talking about money and they haven't written a business plan B) they lack experience in this area and because they don't know much about their choices C) they are focused on the nuts and bolts of starting their business D) they haven't completed a feasibility analysis or business plan E) they are intimidated by the process and they are unsure of how much money they need
Answer: B
2) Which of the following is an example of intellectual property? A) Microsoft's headquarters in Redmond, Washington B) Nike's swoosh logo C) the computer that you use D) AirTran's fleet of planes E) the trucks that deliver White Wave soymilk to grocery stores
Answer: B
20) Which form of business ownership is a particularly poor choice for an aggressive entrepreneurial firm? A) C corporation B) sole proprietorship C) subchapter S corporation D) limited partnership E) limited liability corporation
Answer: B
21) ________ is a term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm's valuation. A) Trademark equity B) Brand equity C) Logo equity D) Trademark value-added E) Trade name strength
Answer: B
22) The Partnering for Success feature in Chapter 10 focuses on TechStars and Y Combinator: A New Breed of Start-Up Incubators. TechStars is headquartered in ________ while Y Combinator is headquartered in ________. A) the Silicon Valley, Chicago B) Boulder, CO, New York City C) Austin, TX, New York City D) the Silicon Valley, Austin, TX E) Chicago, Boulder, CO
Answer: B
22) ________ are projections for future periods based on forecasts and are typically completed for two to three years into the future. A) Chronological financial statements B) Pro forma financial statements C) Ad-hoc financial statements D) Concurrent financial statements E) Historical financial statements
Answer: B
23) According to a study cited in the textbook, ________ of private companies meet the criterion established by business angels for investment. A) 2 percent to 4 percent B) 10 percent to 15 percent C) 18 percent to 30 percent D) 32 percent to 48 percent E) 60 percent to 70 percent
Answer: B
23) All of the following are advantages of a sole proprietorship except: A) creating one is easy and inexpensive B) unlimited liability C) it is not subject to double taxation D) the owner maintains complete control of the business E) business losses can be deducted against the sole proprietor's other sources of income
Answer: B
24) Which of the following statement is not correct regarding business angels? A) Business angels invest in more startups on a yearly basis than venture capitalists. B) The number of angel investors has decreased dramatically over the past decade. C) Business angels usually take a seat on the board of directors of the firms in which they invest. D) Business angels are valuable because of their willingness to make relatively small investments. E) Business angels are difficult to find.
Answer: B
25) A firm's ________ reflects the results of its operations over a specified period and shows whether it is making a profit or is experiencing a loss. A) statement of cash flows B) income statement C) forecast D) balance sheet E) operating budget
Answer: B
25) According to the textbook, the unique value provided by business angels is: A) they are willing to make relatively large investments B) they are willing to make relatively small investments C) they require a fairly low rate of return on their money D) they invest money but typically don't take a seat on a company's board of directors E) they are easy to find
Answer: B
27) A board of directors is typically made up of both: A) junior and senior directors B) inside and outside directors C) experienced and inexperienced directors D) novice and expert directors E) paid and unpaid directors
Answer: B
27) On a firm's income statement, net sales consists of: A) operating expenses minus cost of sales B) total sales minus allowances for returned goods and discounts C) cost of sales minus allowances for returned goods and discounts D) cost of sales minus operating expenses E) total sales minus operating expenses
Answer: B
27) Which of the following statements is incorrect regarding the "core strategy" component of a firm's business model? A) A firm's core strategy describes how it competes relative to its competitors. B) The product a firm chooses has little impact on its core strategy and business model. C) A company's product/market scope defines the products and markets on which it will compete. D) From a broad perspective firms typically choose one of two generic strategies: cost leadership or differentiation. E) The generic strategy a firm chooses greatly affects its business model.
Answer: B
28) A ________ partnership is a modified form of a general partnership. A) restricted B) limited C) partial D) constrained E) fractional
Answer: B
28) In 2010, venture capital firms funded ________ deals . A) 800 B) 3,276 C) 1,265 D) 6,211 E) 7,255
Answer: B
29) A(n) ________ is an early user of a firm's product who is willing to give a testimonial regarding his or her experience with the product. A) tribute account B) reference account C) approval report D) appreciation account E) acknowledgment report
Answer: B
29) Kendra Johnson is starting a firm in the shoe industry. Her shoes will be very high quality and will be priced at the top end of the market. Kendra has chosen the generic strategy referred to as: A) value pricing B) differentiation C) competitive superiority D) separation E) quality plus
Answer: B
33) Real estate, buildings, equipment and furniture are classified as ________ on a company's balance sheet. A) intermediate term assets B) fixed assets C) other assets D) permanent assets E) current assets
Answer: B
33) Susan Spector is in the process of putting together the business model for her startup and is currently working on her core competencies and strategic assets. Which of the components of her business model is Susan working on? A) core strategy B) strategic resources C) partnership network D) customer interface E) feasibility analysis
Answer: B
34) A ________ is a resource or capability that serves as a source of a firm's competitive advantage over its rivals. A) foundational competency B) core competency C) distinctive attribute D) center attribute E) core element
Answer: B
34) A board of directors has three formal responsibilities: A) periodically update the firm's business plan, declare dividends, and write the firm's marketing plan B) appoint the officers of the firm, declare dividends, and oversee the affairs of the corporation C) write the firm's strategic plan, declare dividends, and conduct the annual meeting D) appoint the officers of the firm, conduct the annual meeting, and submit the firm's annual report to the Securities & Exchange Commission E) provide funding to the firm, write the firm's strategic plan, and submit the firm's annual report to the Securities & Exchange Commission
Answer: B
35) As part of drumming up support for an IPO, the investment bank typically takes the top management team of the firm wanting to go public on a ________, which is a whirlwind tour that consists of meetings in key cities where the firm presents its business plan to groups of investors. A) pitch show B) road show C) pitch tour D) road trip E) tornado tour
Answer: B
35) Most C corporations have two classes of stock: A) premium and normal B) common and preferred C) standard and substandard D) regular and special E) ordinary and distinct
Answer: B
35) Which of the following is an example of a long-term liability? A) accounts payable B) real estate mortgage C) accrued expenses D) current portion of real estate mortgage E) owners' equity
Answer: B
35) Zappo's competence in customer service, Apple's competence in designing consumer products, and Netflix's competence in supply chain management are examples of ________, which serve as each of these respective firms' competitive advantage of their rivals. A) foundational competencies B) core competencies C) core elements D) distinguishing attributes E) foundational attributes
Answer: B
37) A firm's working capital is its: A) inventory and accounts receivable minus its current liabilities B) current assets minus its current liabilities C) total assets minus its total liabilities D) cash and cash equivalents minus its current liabilities E) accounts receivable minus its total accounts payable
Answer: B
39) Andy Zackery just launched a firm in the sporting goods industry. On the day the company was launched, Andy issued a press release, indicating that the vice president of Brunswick, a highly respected sporting goods company, had agreed to serve on his board of directors. Andy knows that such a high quality appointment will send an important message to his potential clientele. This phenomenon is referred to as: A) championing B) signaling C) profiling D) indicating E) trumping
Answer: B
4) The fact that companies often falter because the people who start the firms can't adjust quickly enough to their new roles and because the firm lacks a "track record" with outside buyers and sellers, is referred to as the: A) liability of preparedness B) liability of newness C) burden of novelty D) burden of freshness E) millstone of innovation
Answer: B
41) Efforts to establish and maintain a company's image with the public are referred to as: A) open relations B) public relations C) civic relations D) community relations E) advertising
Answer: B
41) In the context of a firm's statement of cash flows, ________ include the purchase, sale, or investment in fixed assets, such as real estate, equipment, and buildings. A) operating activities B) investing activities C) capital activities D) financing activities E) liquidity activities
Answer: B
42) In the context of a firm's statement of cash flows, ________ include cash raised during the period by borrowing money or selling stock and/or cash used during the period by paying dividends, buying back outstanding stock, or buying back outstanding bonds. A) investing activities B) financing activities C) operating activities D) liquidity activities E) capital activities
Answer: B
42) Which of the following was not identified in the textbook as an attribute of an effective board member? A) strong personal and professional networks B) unknown in their field C) investment and/or operating experience D) ability and willingness to mentor the CEO and the top managers of the firm E) pattern recognition skills
Answer: B
44) Organizations (typically nonprofit) that are formed by firms in the same industry to collect and disseminate trade information, offer legal and technical advice, furnish industry-related training, and provide a platform for collective lobbying are called: A) strategic alliances B) trade associations C) networks D) joint ventures E) consortia
Answer: B
44) The major advantage of leasing is that: A) it enables a company to have access to average or above average facilities and equipment B) it enables a company to acquire the use of assets with little or no down payment C) it is cheaper in the long run than purchasing D) a lease agreement is easier to negotiate than a purchase agreement E) it is easier to obtain credit on a lease than a purchase
Answer: B
45) The ________ is a competitive grant program that provides over $1 billion per year to small businesses for early-state and development projects. A) SBTA Program B) SBIR Program C) SBAP Program D) SAIR Program E) SBTR Program
Answer: B
46) The Partnering for Success feature in Chapter 6 focuses on 99designs, an online company that features a "crowdsourcing" model for getting design work done. 99designs' approach to partnering with ________ is the essence of its disruptive business model. A) professional art studios B) freelance designers C) art students D) Google, Yahoo, and Microsoft E) art teachers
Answer: B
46) Which of the following is an advantage of a C Corporation? A) Setting up and maintaining one is more difficult than for a sole proprietorship or a partnership. B) Stock is liquid if traded on a major stock exchange. C) Business losses cannot be deducted against the shareholders' other sources of income. D) Income is subject to double taxation. E) Small shareholders typically have little voice in the management of the firm. Answer: B
Answer: B
47) According to the textbook, trade secret disputes arise most frequently when: A) one firm alleges that it can legally use another firm's trade secrets because they were "voluntarily" disclosed B) an employee leaves a firm to join a competitor and is accused of taking confidential information with him or her C) one firm claims that another firm outright stole its trade secrets D) one firms claims that what another firm is claiming as a trade secret is common knowledge E) one firm claims that it obtained another firm's trade secrets through legal means
Answer: B
47) The SBIR is a ________, meaning that firms that qualify have the potential to receive more than one grant to fund a particular proposal. A) two-phase program B) three-phase program C) six-phase program D) nine-phase program E) twelve-phase program
Answer: B
49) Gary Smith just launched a firm in the sports drink industry. He has decided to focus his efforts on appealing to extreme sports enthusiasts (examples include hang gliders, rock climbers, and parachutists). In Gary's case, extreme sports enthusiasts represent his firm's: A) target objective B) target market C) goal objective D) intention market E) object market
Answer: B
5) The term ________ refers to initiatives, such as Netflix in movie rentals and Zipcar in car sharing, which revolutionize how products are sold in an industry. A) product model modernism B) business model innovation C) feasibility analysis innovation D) value innovation E) opportunity innovation
Answer: B
50) Fulfillment and support describes: A) how a firm manages its customer relationships B) the way a firm's product or service "goes to market" or how it reaches its customers C) how a firm manages its employees D) the products and markets on which a firm will compete E) how a firm competes relative to its competitors
Answer: B
50) There are two primary reasons to conduct an intellectual property audit. First, it is prudent for a company to periodically determine whether its intellectual property is being properly protected. The second reason for a company to conduct an intellectual property audit is to: A) remain prepared for a Security & Exchange Commission spot inspection B) remain prepared to justify its value in the event of a merger or acquisition C) remain prepared for an initial public offering D) update the value of its intellectual property on its balance sheet E) make sure no intellectual property has been stolen
Answer: B
6) The Savvy Entrepreneurial Firm feature in Chapter 6 focuses on three business model innovators: Warby Parker, Shopkick, and SunRun. What is Shopkick's business model innovation? A) rewarding shoppers by the number of times they visit a Web site B) rewarding shoppers by simply walking into a retail store C) rewarding shoppers by the amount of time they spend in a particular store D) rewarding shoppers by the number of times they visit a particular store E) rewarding shoppers by the number of times they "tweet" about a particular store on Twitter
Answer: B
14) Which of the following is a "support" activity in the value chain? A) inbound logistics B) service C) marketing and sales D) outbound logistics E) resource procurement
Answer: E
6) The What Went Wrong feature in Chapter 12 focuses on Dippin' Dots, a company that sells ice cream snacks. Dippin' Dots lost the patent on its small beads of ice cream primarily because: A) it failed to obtain permission from a patent holder that has "prior art" pertaining to the claims in its patent B) it had sold its ice cream product one year prior to applying for a patent C) it filed its patent application incorrectly D) its patent infringes on the patent of a competitor E) it failed to renew its patent on time
Answer: B
7) A ________ is a place within a market segment that represents a narrower group of customers with similar interests. A) position market B) niche market C) slot market D) spot market E) gap market
Answer: B
7) Which of the following was not identified in the textbook as an element of a new venture team? A) board of advisors B) suppliers and vendors C) key employees D) lenders and investors E) management team
Answer: B
8) According to the textbook, studies show that more than one individual starts ________ of all new firms. A) 20 to 25 percent B) 50 to 70 percent C) 5 to 15 percent D) 30 to 40 percent E) 75 to 90 percent
Answer: B
1) inDinero, the company profiled in the opening feature for Chapter 10, is described by its cofounders as "the fastest way for small businesses to manage their finances." Which of the following is not true about inDinero's founding story? A) In 2009, inDineor's founders applied to TechStars, which is a Boulder, CO-based seed-stage fund/incubator, and were turned down. B) The idea for inDinero originated in mid-2009 while its cofounders were still in college. C) In April 2010, the founders of inDinero applied to Y Combinator, an organization that provides seed-stage funding, mentorship, and networking opportunities to participants, and were turned down. D) inDinero reportedly has over 15,000 users . E) In late 2009 and early 2010, the founders of inDinero tried to raise angel funding and were unsuccessful.
Answer: C
10) Jason Graham's startup, which is in the electronics industry, was launched on January 1, 2009. However, prior to its formal launch, Jason spent many hours working on his business, particularly during the feasibility analysis stage. The time and effort that entrepreneurs put into their venture, that can't be easily measured from a financial point of view, is referred to as: A) effort equity B) intangible equity C) sweat equity D) worry equity E) fret equity
Answer: C
11) According to the textbook, beyond their own funds, the second source of funds for many new ventures is: A) government grants B) business angels C) friends and family D) banks E) venture capital
Answer: C
11) Which of the following is a "primary" activity in the value chain? A) resource procurement B) technology development C) outbound logistics D) firm infrastructure E) human resource management
Answer: C
13) The members of homogeneous teams are: A) diverse in terms of their abilities and experiences B) diverse in terms of their abilities, but very similar in terms of their experiences C) similar in terms of their abilities and experiences D) diverse in terms of their experiences, but very similar in terms of their abilities E) sometimes diverse in terms of their abilities and experiences and sometimes similar along the same dimensions
Answer: C
13) The strength and vigor of a firm's overall financial posture is referred to as: A) liquidity B) effectiveness C) stability D) profitability E) efficiency
Answer: C
15) According to the textbook, prior entrepreneurial experiences: A) is one of the poorest predictors of future entrepreneurial performance B) is one of the most consistent predictors of future entrepreneurial performance for entrepreneurs under 50 years of age but not for entrepreneurs over 50 years of age C) is one of the most consistent predictors of future entrepreneurial performance D) is one of the most consistent predictors of future entrepreneurial performance in service firms but not in manufacturing firms E) has no relationship to future entrepreneurial performance
Answer: C
15) There are three basic requirements for a patent to be granted. The subject of the patent application must be: A) useful, difficult to copy, and novel in relation to prior arts in the field B) based on cutting edge science or technology, not obvious to a person of ordinary skill in the field, and rare C) useful, novel in relation to prior arts in the field, and not obvious to a person of ordinary skill in the field D) rare, difficult to copy, and not obvious to a person of ordinary skill in the field E) useful, scientific, and novel in relation to prior arts in the field
Answer: C
16) Which of the following statements is not true regarding the attributes of the founder or founders of a firm? A) Evidence suggests that important entrepreneurial skills are enhanced through higher education. B) Founders with prior entrepreneurial experience are more likely to avoid costly mistakes. C) Founders with experience in the same industry as their new ventures will typically have "blinders" on and are typically not as effective as founders new to the industry. D) Founders with broad social and professional networks have an advantage. E) New ventures that are started by a team rather than an individual have an advantage.
Answer: C
16) ________ involves all the activities required to manufacture a product. A) Resource procurement B) Administration C) Operations D) Outbound logistics E) Inbound logistics
Answer: C
17) Equity investors typically have a ________ investment horizon. A) 1 to 3 year B) 2 to 4 year C) 3 to 5 year D) 4 to 6 year E) 5 to 7 year
Answer: C
17) Match the financial term with its proper definition. A) forecasts/depict relationships between items on a firm's financial statements B) forecasts/written report that quantitatively describes a firm's financial health C) budgets/itemized forecasts of a company's income, expenses, and capital needs D) financial ratios/written report that quantitatively describes a firm's financial health E) financial statements/an estimate of a firm's future income and expenses
Answer: C
18) The process of building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to the firm is called: A) linking B) socializing C) networking D) associating E) connecting
Answer: C
31) According to the textbook, ________ are common in real estate development, oil and gas exploration, and motion picture ventures. A) sole proprietorships B) limited liability companies C) Subchapter S Corporations D) limited partnerships E) general partnerships
Answer: D
19) The three most common forms of equity funding are: A) friends and family, venture capital, bank loans B) SBIR grants, SBA guaranteed loans, bank loans C) initial public offerings, business angels, venture capitalists D) friends and family, business angels, bootstrapping E) SBIR grants, venture capital, initial public offerings
Answer: C
2) A ________ is the group of founders, key employees, and advisers that move a new venture from an idea to a fully functioning firm. A) new venture panel B) startup team C) new venture team D) new project team E) startup cadre
Answer: C
2) Andy Sanders owns a sporting goods store that appeals to hunters and fishermen. The market that Andy is trying to appeal to is called his: A) focal market B) objective market C) target market D) critical market E) intention market
Answer: C
2) Financial management deals with two things—managing a company's finances and: A) operations management B) inventory control C) raising money D) production management E) supply chain management
Answer: C
21) The Partnering for Success feature in Chapter 12 starts by talking about Gary Schwartzberg, who, along with a partner, developed a new type of bagel dubbed the "Begeler," which was eventually licensed to Kraft. According to the feature, entrepreneurs and inventors, like Gary Schwartzberg, are finding that large consumer products companies are: A) ambivalent about what they have to offer B) increasingly interested in what they have to offer for new products, but are ambivalent about services C) increasingly interested in what they have to offer D) increasingly interested in what they have to offer for new services, but are ambivalent about products E) increasingly disinterested in what they have to offer
Answer: C
21) Which of the following is not one of the four factors identified in the textbook as critical in selecting a form of business ownership? A) the cost of setting up and maintaining the legal form B) the number and types of investors involved C) accounting considerations D) tax considerations E) the extent to which personal assets can be shielded from the liabilities of the business
Answer: C
21) ________ reflect past performance and are usually prepared on a quarterly and annual basis. A) Chronological financial statements B) Ad-hoc financial statements C) Historical financial statements D) Concurrent financial statements E) Pro forma financial statements
Answer: C
22) A skills profile is a chart that depicts the: A) preferable skills and abilities of the members of a firm's board of advisors B) preferable skills and abilities of the members of a firm's board of directors C) most important skills that are needed in a business startup and where skills gaps exist D) skills and abilities that will be needed for a firm to maintain an aggressive growth strategy E) the skills of a company's customers and how those skills impact the product and services a company provides
Answer: C
23) The Savvy Entrepreneurial Firm feature in Chapter 11 focuses on Airbnb, the company that created a marketplace for people to list, discover, and book unique spaces in people's homes or apartments while traveling. According to the feature, Airbnb was able to generate substantial buzz about its service via the use of: A) Facebook B) Google AdSense C) blogs D) newspaper ads E) Twitter
Answer: C
23) Which of the following is not a type of trademark? A) trademark B) certification mark C) documentation mark D) collective mark E) service mark
Answer: C
23) Which of the following statements about pro forma financial statements is incorrect? A) Pro forma financial statements are projections for future periods based on forecasts. B) Pro forma financial statements are typically completed for two to three years into the future. C) Pro forma financial statements are required by the SEC. D) Most companies consider their pro forma financial statements to be confidential and reveal them to outsiders only on a "need to know basis." E) Pro forma financial statements are strictly planning tools.
Answer: C
25) Which of the following is not one of the four elements that constitute a firm's marketing mix? A) price B) promotion C) passion D) place (or distribution) E) product
Answer: C
26) A company's ________ defines the products and markets on which it will concentrate. A) tactical analysis B) business mission C) product/market scope D) supplier/buyer scope E) basis of differentiation
Answer: C
27) Which of the following is not an advantage of a general partnership? A) Business losses can be deducted against the partners' other sources of income. B) The skills and abilities of more than one individual are available to the firm. C) The liquidity of each partner's investment is low. D) Creating one is relatively easy and inexpensive compared to a c corporation or limited liability company. E) It is not subject to double taxation.
Answer: C
28) According to the textbook, the three numbers that receive the most attention when evaluating an income statement are: A) depreciation, interest income, and income tax expense B) cost of sales, gross profit, and operating expenses C) net sales, cost of sales, and operating expenses D) gross profit, net sales, and incomes tax expense E) gross profit, other income, and net income
Answer: C
28) Which of the following is an example of a certification mark? A) ModCloth B) International Franchise Association C) Underwriter's Laboratories D) Rotary International E) 1-800-FREE-411
Answer: C
3) Catherine Smith has just finished writing a business plan for a startup in the medical products industry. She has now reached the point where she needs to develop a plan for how her firm will compete, use its resources, structure its relationships, interface with customers, and create value to sustain itself on the basis of the profits it earns. Jennifer needs to establish her firm's: A) tactical plan B) feasibility plan C) business model D) business template E) operating plan
Answer: C
3) Jenny Templeton is preparing to launch a home security firm. The team of people that will launch Jenny's firm are as follows: Jenny (CEO), Brent (VP-Finance), Carrie (VP-Sales), a four-person Board of Directors, a five-person Board of Advisors, and Jenny's primary investor, who will assume an advisory role. The group of people that will launch Jenny's firm is called its: A) startup squad B) new venture panel C) new venture team D) startup cadre E) startup troop
Answer: C
3) Kimberly Jones is the founder of a company in the medical equipment industry. Kimberly's firm is still in the feasibility analysis stage and doesn't have a product that is ready to sell. The company is spending about $25,000 per month and expects to maintain that level of spending until it reaches profitability. The $25,000 a month is Kimberly's: A) consumption rate B) utilization rate C) burn rate D) usage rate E) liquidity rate
Answer: C
3) Which of the following was not identified as one of the four main financial objectives of a firm? A) stability B) efficiency C) timeliness D) liquidity E) profitability
Answer: C
30) Before Kim Green opened her jiffy print store, she processed several large print jobs for local merchants for free, to demonstrate the quality of her service and to solicit feedback. Two of the merchants wrote favorable reviews of Kim's service, and agreed to let Kim post the reviews on her company's Web site. The companies that wrote the favorable reviews are referred to as: A) appreciation reports B) acknowledgement accounts C) referent accounts D) tribute reports E) approval reports
Answer: C
30) In the context of boards of directors, a(n) ________ is a person who is also an officer of the firm. A) outside director B) junior director C) inside director D) expert director E) senior director
Answer: C
31) An important part of obtaining venture capital funding is going through ________, which refers to the process of investigating the merits of a potential venture and verifying the key claims made by the business plan. A) appropriate diligence B) fit diligence C) due diligence D) prior diligence E) responsible diligence
Answer: C
31) Firms that have a ________ strategy strive to have the lowest costs in the industry, relative to competitors' costs, and typically attract customers on that basis. In contrast, firms using a ________ strategy compete on the basis of providing unique or different products and typically compete on the basis of quality, service, timeliness, or some other important dimension. A) differentiation, cost leadership B) cost emphasis, quality leadership C) cost leadership, differentiation D) price reduction, quality plus E) cost differentiation, quality plus
Answer: C
31) Which of the following statement is incorrect regarding how balance sheets are prepared? A) The left hand side of a balance sheet shows a firm's assets. B) The assets on a balance sheet are shown in order of liquidity. C) Assets are recorded at fair market value rather than cost. D) The right hand side of a balance sheet shows a firm's liabilities and its owners' equity. E) Intellectual property receives value in some cases and in some cases it does not.
Answer: C
32) Match the business model component with its explanation: A) core strategy/how a firm structures and nurtures its partnerships B) customer interface/how a firm acquires and uses its resources C) strategic resources/how a firm acquires and uses its resources D) partnership network/how a firm competes E) core strategy/how a firm interfaces with its customers
Answer: C
33) Which of the following statements about copyrights is incorrect? A) Businesses typically possess a treasure trove of copyrightable material. B) A musical composition that is written down is copyrightable. C) Copyrightable material may be in tangible or intangible form. D) The 1976 Copyright Act governs copyright law in the United States. E) A copyright is a form of intellectual property protection.
Answer: C
35) If a local band wrote their own rendition of a Celine Dion song, the band could try to copyright their rendition of the song as a(n): A) imitative work B) offshoot work C) derivative work D) subsequent work E) supplemental work
Answer: C
36) Copyright law protects any work of authorship: A) 90 days after it is approved by the U.S. Copyright Office B) one year after it assumes a tangible form C) the moment it assumes a tangible form D) as soon as it is approved by the U.S. Copyright Office E) 30 days after it assumes a tangible form
Answer: C
36) Which of the following is true regarding common stock and preferred stock? A) Preferred stock is rarely issued. B) Common stock is rarely issued. C) Common stock is issued more broadly than preferred stock. D) Preferred stock is issued more broadly than common stock. E) Common stock and preferred stock are issued in the same amount.
Answer: C
37) ________ is typically issued to conservative investors who have preferential rights over common stockholders in regard to dividends and to the assets of the corporation in the event of liquidation. A) Restricted stock B) Partial stock C) Preferred stock D) Common stock E) Limited liability stock
Answer: C
38) In a business model context, the three components of a firm's partnership network are: A) business mission, partners, and strategic assets B) core competencies, suppliers, and target customer C) suppliers, partners, and other key relationships D) business mission, product/market scope, and basis for differentiation E) pricing structure, fulfillment and support, and target customer
Answer: C
39) The most notable SBA program available to small businesses is the: A) SBA 1060 Guaranty B) Code 604 Guaranty Program C) 7(A) Guaranty Program D) SBA 101 Program E) Small Business 401 Program
Answer: C
39) Which of the financial statements used by businesses to keep track of their financial affairs is the most similar to an ordinary person's end-of-the month bank statement? A) income statement B) balance sheet C) statement of cash flows D) statement of ratio analysis E) statement of owners' equity
Answer: C
4) Which of the following is the correct sequence of events in regard to the process of selecting a target market and position strategy? A) creating a unique positioning strategy, selecting a target market, segmenting the market B) segmenting the market, creating a unique positioning strategy, selecting a target market C) segmenting the market, selecting a target market, creating a unique positioning strategy D) selecting a target market, creating a unique positioning strategy, segmenting the market E) creating a unique positioning strategy, segmenting the market, selecting a target market
Answer: C
30) Jared King is starting a firm in the electronic games industry. The firm will produce games similar to popular games on the market, but they won't be as sophisticated and will be priced at the low end of the market. Jared has chosen the generic strategy referred to as: A) price reduction B) differentiation C) quality plus D) cost leadership E) cost differentiation
Answer: D
4) Which of the following was not identified in the textbook as one of the common mistakes that entrepreneurs make regarding intellectual property? A) not fully recognizing the value of their intellectual property B) not properly identifying all their intellectual property C) not properly registering their Internet domain names D) not using their intellectual property as part of their overall plan for success E) not taking sufficient steps to protect their intellectual property
Answer: C
40) According to a survey conducted by the National Small Business Association between August 2008 and December 2009, between ________ percent of business owners utilized vendor credit. A) 12 and 18 B) 17 and 21 C) 22 and 29 D) 35 and 40 E) 52 and 58
Answer: C
40) The Google program called ________ allows advertisers to buy keywords on the Google Home Page. A) AdSense B) Adcenter C) AdWords D) Search Marketing E) AdGoogle
Answer: C
40) The network of companies that participate in the production of a product, from the acquisition of raw materials to the final sale, is referred to as the: A) input chain B) participation chain C) supply chain D) involvement network E) contribution chain
Answer: C
41) A company's customer list is most commonly protected under ________ regulations. A) patent B) copyright C) trade secret D) trademark E) collective mark
Answer: C
41) A hub and wheel configuration with a local firm at the hub organizing the interdependencies of a complex array of firms is referred to as a: A) trade association B) strategic alliance C) network D) joint venture E) consortia
Answer: C
41) Corporations that trade their stock on organized exchanges like the New York Stock Exchange and the NASDAQ are called: A) national corporations B) civil corporations C) public corporations D) premier corporations E) common corporations
Answer: C
42) Prosper is the best known: A) factor B) provider of SBA guaranteed loans C) peer-to-peer lending network D) provider of vendor credit E) crowdfunding network
Answer: C
43) A ________ is a group of organizations with similar needs that band together to create a new entity to address those needs. A) joint venture B) network C) consortia D) strategic alliance E) trade association
Answer: C
44) Which of the following items would typically be protected by a form of intellectual property protection other than trade secret statutes? A) financial forecast B) product formula C) a company's tagline D) logs of sales calls E) employee roster
Answer: C
44) William Woods recently launched a printing company. One thing William is thinking about creating is a panel of experts who can provide him ongoing direction and advice regarding the future of his business. William is thinking about creating a(n): A) analysis panel B) discussion board C) advisory board D) suggestion panel E) accountability panel
Answer: C
46) The ________, which was drafted in 1979 by a special commission, attempted to set nationwide standards for trade secret legislation. A) Intangible Assets Protection Act B) Fairness in Intellectual Property Act C) Uniform Trade Secrets Act D) Trademark & Copyright Act E) Economic Espionage Act
Answer: C
46) Which of the following statements about advisory boards is incorrect? A) The fact that a corporation has a board of directors does not preclude it from establishing one or more advisory boards. B) An advisory board can be established for general purposes or can be set up to address a specific issue or need. C) Similar to a board of directors, an advisory board has legal responsibility for the firm in certain areas. D) An advisory board is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis. E) A growing number of startups are forming advisory boards.
Answer: C
48) A firm's sales process: A) is typically not put in place until a year or more after a startup launches B) describes a firm's branding strategy C) depicts the steps it goes through to identify prospects and close sales D) describes its social media strategy E) depicts the steps it goes through to identify its target market and positioning strategy
Answer: C
48) The main difference between the SBIR and the STTR programs is that the STTR program requires the participation of: A) an attorney B) a venture capitalist C) researchers working at universities or other research institutions D) a certified public accountant E) a government agency in conducting the research
Answer: C
49) The ________ is a form of business organization that is rapidly gaining popularity in the United States. The concept originated in Germany and was first introduced in the United States in the state of Wyoming. A) limited partnership B) general partnership C) limited liability company D) subchapter S corporation E) C corporation
Answer: C
49) The first step in the formal sales process described in the book is: A) qualify the lead B) make the sales presentation C) prospect for sales leads D) meet objections and concerns E) make the initial contact
Answer: C
5) Brenda Berry is thinking about starting a computer company. After doing some research, she has decided that the computer industry can be divided into the following product categories: handheld computers, laptops, tablet computers, PCs, minicomputers, and mainframes. She is now trying to decide which product category she is the most interested in competing in. The process that Brenda is going through is called: A) market splitting B) market subdividing C) market segmentation D) market dividing E) market separating
Answer: C
5) Savanna Combs opened a clothing boutique two years ago. Unfortunately, the boutique failed after 18 months. Savanna attributes the failure of her boutique to the facts that her employees couldn't adjust quickly enough to their new roles and that her boutique lacked a "track record" with outside buyers and sellers, which made it difficult to form partnerships and make sales. Savanna suffered from what research calls the: A) burden of novelty B) millstone of innovation C) liability of newness D) liability of preparedness E) burden of newness
Answer: C
30) Once a venture capitalist makes an investment in a firm, subsequent investments are made in rounds and are referred to as: A) later funding B) successive funding C) subsequent backing D) follow-on funding E) ensuing backing
Answer: D
5) There are two primary rules of thumb for deciding if intellectual property protection should be pursued for a particular intellectual asset. First, a firm should determine if the intellectual property in question is directly related to its competitive advantage. Second, a firm should determine if its intellectual property: A) is less than 20 years old B) could be licensed to another company C) has value in the marketplace D) is something that was developed "in-house" E) rightfully belongs to the firm or the employees who developed it
Answer: C
5) Which of the following is the most important thing that an entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization? A) implement an ethics training program B) write a mission statement C) lead by example D) hire an ethics compliance officer E) write a code of conduct
Answer: C
50) According to the textbook, the most important function of the pro forma statement of cash flows is to project whether the firm will have sufficient: A) income to meet its payroll on a weekly or monthly basis B) income to exceed industry norms C) cash to meet its needs D) inventory to meet its sales and production forecasts E) short-term assets to cover its short-term liabilities
Answer: C
50) In which form of business ownership are the owners called "members"? A) general partnership B) limited partnership C) limited liability company D) subchapter C corporation E) C corporation
Answer: C
6) Once a firm has segmented the market, the next step is to: A) decide on a position within the segment B) select a critical market C) select a target market D) select a focal market E) immediately decide on the "4Ps" of the marketing strategy
Answer: C
6) The high failure rate among new ventures is due in part to the liability of newness, which refers to the fact that new companies often falter because: A) they are underfunded and the founders of the firms don't move quickly enough to put together boards of directors and boards of advisors that can provide them direction and advice B) the founders of the firms underestimate the complexities involved with starting a new business and the firms lack a "track record" with outside buyers and sellers C) the people who start the firms can't adjust quickly enough to their new roles and the firms lack a "track record" with outside buyers and sellers D) the people who start the firms can't adjust quickly enough to their new roles and they are underfunded E) the founders of the firms underestimate the complexities involved with starting a new business and they don't move quickly enough to establish business partnerships
Answer: C
8) A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n): A) ethical quandary B) ethical predicament C) ethical dilemma D) principled quandary E) just dilemma
Answer: C
8) In the WebHouse example included in Chapter 6, WebHouse failed because: A) it did not complete a feasibility analysis B) it did not write a complete business plan C) it couldn't motivate its suppliers or customers to participate at a sufficient scale to support the overhead of the business D) it charged too much for its services E) it failed to focus on developing a core strategy
Answer: C
8) Money owed to a company by its customers is referred to as: A) accounts obtainable B) accounts payable C) accounts receivable D) inventory E) accounts collectable
Answer: C
9) A(n) ________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest. A) entrepreneurs' agreement B) creators' agreement C) founders' agreement D) initiators' agreement E) originators' agreement
Answer: C
1) True You Cosmetics, the company profiled in the opening feature in Chapter 11, sells cosmetics products. The company's marketing efforts to date have focused heavily on: A) Google AdWords and AdSense B) print advertising C) radio D) social media E) television advertising
Answer: D
10) A company's merchandise, raw materials, and products waiting to be sold is called its: A) set aside B) accumulation C) reserve D) inventory E) stock
Answer: D
10) Which of the following is not a "primary" activity in the value chain? A) inbound logistics B) marketing and sales C) service D) technology development E) outbound logistics
Answer: D
12) A product attribute map is used to help a firm determine: A) if it is emphasizing benefits rather than features B) if its branding strategy is appropriate C) if its market segmentation is correct D) if its positioning strategy is appropriate E) if its target market is appropriate
Answer: D
12) Since the first patent was granted, there have been over ________ patents granted in the United States. A) 500,000 B) 3 million C) 5 million D) 7 million E) 9 million
Answer: D
13) Which of the following selections correctly identifies the three types of patents? A) manufacturing patents, process patents, and plant patents B) usefulness patents, purpose patents, and genetic patents C) explicit patents, implicit patents, and plant patents D) utility patents, design patents, and plant patents E) manufacturing patents, service patents, and other patents
Answer: D
14) Which of the following was not identified in the textbook as a common (and sound) bootstrapping strategy? A) coordinate purchases with other businesses B) hire interns C) minimize personal expenses D) buy rather than lease equipment E) obtain payments in advance from customers
Answer: D
14) ________ patents are the most common type of patent and cover what we generally think of as new inventions. A) Value B) Product C) Method D) Utility E) Design
Answer: D
15) Which of the following statements is correct regarding the concept of branding? A) Brands cannot be built through advertising, public relations, sponsorships, social media, or similar techniques. B) A company doesn't normally want its customers to identify with its brand. C) Startups usually start with an established brand. D) A brand can be one of a company's most valuable assets. E) A brand can denote a negative impression of a company.
Answer: D
56) Homogeneous teams are diverse in terms of their abilities and experiences.
Answer: FALSE
16) Rachael James just took a job with IKEA. As part of her employment agreement, IKEA required Rachael to sign an agreement, which states that if she leaves IKEA, she will not work for a firm that competes against IKEA for at least two years. The agreement that Rachael signed is called a: A) nondisclosure agreement B) nonparticipate agreement C) nonchallenge agreement D) noncompete agreement E) noncontend agreement
Answer: D
16) The term of a utility patent is: A) 7 years from the date the patent is granted B) 15 years from the date of the initial application C) 15 years from the date the patent is granted D) 20 years from the date of the initial application E) 20 years from the date the patent is granted
Answer: D
16) ________ are itemized forecasts of a company's income, expenses, and capital needs and are also an important tool for financial planning and control. A) Profitability statements B) Financial statements C) Owners' equity statements D) Budgets E) Statements of cash flows
Answer: D
17) Which of the following qualities was not identified in the textbook as a preferred attribute of the founder or founders of a firm? A) prior entrepreneurial experience B) firm started by a team C) relevant industry experience D) prior experience working in a government or university position E) higher education
Answer: D
19) A utility patent is good for ________ from the date of the original application, a design patent is good for ________ from the date the patent is granted, and a plant patent is good for ________ from the date of the original application. A) 14 years, 14 years, 20 years B) 20 years, 20 years, 14 years C) 20 years, 20 years, 20 years D) 20 years, 14 years, 20 years E) 14 years, 20 years, 14 years
Answer: D
19) Which of the following is not one of the components of a firm's business model? A) core strategy B) strategic resources C) partnership network D) business plan E) customer interface
Answer: D
20) A(n) ________ is a chart that depicts the most important skills that are needed in a new venture and where skills gaps exist. A) expertise report B) talent profile C) abilities summary D) skills profile E) talent summary
Answer: D
22) According to the textbook, a successful brand can increase the market value of a company by: A) 5 to 10 percent B) 20 to 30 percent C) 40 to 50 percent D) 50 to 75 percent E) 75 to 100 percent
Answer: D
24) A 2011 survey conducted by the University of Maryland's School of Business and Network Solutions asked small business owners how well they competed with other companies for good employees, and only ________ said they were successful. A) 16 percent B) 28 percent C) 30 percent D) 46 percent E) 66 percent
Answer: D
24) A firm's ________ is the set of controllable, tactical marketing tools that it uses to produce the response it wants in the target market. A) tactical mix B) promotional blend C) organizational mix D) marketing mix E) selling mix
Answer: D
24) Which of the following statements is incorrect regarding sole proprietorships? A) There is one owner. B) Sole proprietor is in full control. C) Business ends at the owner's death or loss of interest in the business. D) Liquidity of the investment is high. E) Money must be raised by the sole proprietor.
Answer: D
25) Partnerships are organized as either: A) specific or general partnerships B) narrow or broad partnerships C) inward or outward partnerships D) general or limited partnerships E) partial or full partnerships
Answer: D
25) ________ are similar to ordinary trademarks, but they are used to identify the services or intangible activities of a business rather than a business's physical product. A) Creative marks B) Intangible marks C) Examination marks D) Service marks E) Subtle marks
Answer: D
26) Kate Harrison is in the process of launching an educational services firm. She plans to incorporate the firm. Because the firm will be incorporated, Kate is legally required to have a: A) board of investors B) board of advisors C) customer advisory board D) board of directors E) panel of advisors and peers
Answer: D
27) A firm's ________, in the context of its marketing mix, is the good or service it offers to its target market. A) conception B) idea C) formation D) product E) invention
Answer: D
27) The Good Housekeeping Seal of Approval is an example of a(n): A) collective mark B) shared mark C) service mark D) certification mark E) assessment mark
Answer: D
28) From a broad perspective, firms choose one of two generic strategies to position themselves in the marketplace. These are: A) high quality and low cost B) discount pricing and premium pricing C) value and low cost D) cost leadership and differentiation E) cost premium and separation
Answer: D
29) A board of directors is typically made up of both inside and ________ directors. A) leading B) subordinate C) specialist D) outside E) impartial
Answer: D
29) Which of the following statements about limited partnerships is incorrect? A) A limited partnership is a modified form of a general partnership. B) Limited partnerships are common in real estate and oil and gas exploration. C) A limited partnership is usually formed to raise money or to spread out the risk of a venture without forming a corporation. D) Both the limited partners and the general partners are responsible for the debts and obligations of the partnership. E) A limited partnership contains two classes of owners: general partners and limited partners.
Answer: D
3) According to the 2009 National Business Ethics Survey, a total of ________ of the employees surveyed said they had observed misconduct or unethical behavior in the past year. A) 12 percent B) 21 percent C) 32 percent D) 49 percent E) 60 percent
Answer: D
30) A(n) ________ is a snapshot of a company's assets, liabilities, and owners' equity at a specific point in time. A) income statement B) statement of cash flows C) effectiveness statement D) balance sheet E) efficiency statement
Answer: D
30) Which of the following is not generally eligible for trademark protection? A) trade dress B) shapes C) words D) surnames E) designs or logos
Answer: D
33) Corporations are organized as either: A) permanent corporations or temporary corporations B) general corporations or limited corporations C) voluntary corporations or statutory corporations D) C corporations or subchapter S corporations E) regular corporations or limited liability corporations
Answer: D
34) A(n) ________ is an institution, such as Credit Suisse First Boston, that acts as an underwriter or agent for a firm engaged in an initial public offering. A) venture bank B) statutory bank C) fiduciary bank D) investment bank E) public bank
Answer: D
34) Cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories are classified as ________ on a firm's balance sheet. A) other assets B) intermediate term assets C) temporary assets D) current assets E) fixed assets
Answer: D
34) Large firms like 3M, Google, Oracle, and Microsoft, that trade on organized stock exchanges, are: A) limited partnerships B) limited liability companies C) subchapter S corporations D) C corporations E) general partnerships
Answer: D
34) Pat Walker owns an environmental services company. The way Pat prices her services is to figure her cost and then add a 22 percent markup. The method that Pat uses to determine her prices is called: A) economic-based pricing B) value-based pricing C) competitive-based pricing D) cost-based pricing E) conformity-based pricing
Answer: D
35) A board of directors has three formal responsibilities: appoint the officers of the firm, oversee the affairs of the corporation, and: A) conduct the annual meeting B) provide funding for the firm C) submit the firm's annual report to the stockholders D) declare dividends E) write the firm's strategic plan
Answer: D
36) When evaluating a balance sheet, the two primary questions are: A) whether a firm has sufficient short-term assets to cover its short-term debts and whether it is profitable B) whether a firm is profitable and whether a firm is financially sound C) whether its costs of sales is going up and whether it is generating excess cash that could be used to pay down debt or pay dividends D) whether a firm has sufficient short-term assets to cover its short-term debts and whether it is financially sound E) whether a firm is profitable and whether it is generating excess cash that could be used to pay down debt or pay dividends
Answer: D
37) Which of the following symbols is the copyright bug? A) ç B) € C) ¢ D) © E) ™
Answer: D
37) ________ are anything rare and valuable that a firm owns. A) Tactical assets B) Tactical properties C) Deliberate assets D) Strategic assets E) Operational assets
Answer: D
38) There are two major advantages of getting a loan versus investment capital: A) the money doesn't have to be paid back and lenders typically take an active interest in their borrowers B) banks are reliable sources of funding for startups and interest payments are tax deductible C) the money doesn't have to be paid back and no ownership in the firm is surrendered D) no ownership in the firm is surrendered and interest payments are tax deductible E) banks are reliable sources of funding for startups and lenders typically take an active interest in borrowers
Answer: D
39) ________ refers to the activities the firm takes to communicate the merits of its product to its target market. A) Sponsorship B) Advertising C) Endorsement D) Promotion E) Price
Answer: D
40) Melissa Jones just launched a firm in the wireless communications industry. Shortly after the company was launched, Melissa announced that a prominent Silicon Valley venture capitalist had agreed to serve on her board of directors. Melissa knows that such a high quality appointment will send an important message to her potential business partners and clientele. This phenomenon is referred to as: A) trumping B) championing C) profiling D) signaling E) indicating
Answer: D
42) A ________ is any formula, pattern, physical device, idea, process, or other information that provides the owner of the information with a competitive advantage in the marketplace. A) patent B) copyright C) trademark D) trade secret E) certification mark
Answer: D
43) A(n) ________ is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis. A) consultation board B) idea panel C) counseling panel D) advisory board E) suggestion panel
Answer: D
43) According to the textbook, the most practical way to interpret or make sense of a firm's historical financial statements is through: A) profit analysis B) regression analysis C) the preparation of pro forma financial statements D) ratio analysis E) percentage analysis
Answer: D
43) If the owners of a corporation don't file their annual paperwork, neglect to pay their annual fees, or commit fraud, a court could ignore the fact that a corporation has been established and the owners could be held personally liable for the actions of the corporation. This chain of events is referred to as: A) vacating the corporate status B) yielding the corporate privilege C) surrendering the corporate shield D) piercing the corporate veil E) capitulating the corporate doctrine
Answer: D
43) Twitter, Facebook and company blogs are examples of: A) public media B) group media C) shared media D) social media E) community media
Answer: D
44) Kevin Pierce was reading the business plan of New Venture Fitness Drinks, and noticed that prior to its financial forecasts, New Venture Fitness Drinks placed an explanation of the sources of the numbers for the forecast and the assumptions used to generate them. This explanation is called a(n): A) forecast sheet B) forecast hypothesis C) estimate statement D) assumption sheet E) hypothesis sheet
Answer: D
44) ________ are a special form of incentive compensation. These plans provide employees the option or right to buy a certain number of shares of their company's stock at a stated price over a certain period of time. A) Corporate options B) Collective plans C) Share plans D) Stock options E) Dividends
Answer: D
15) ________ involves a firm's relationship with its suppliers and involves all the activities of receiving, storing, and shipping component parts to the place where they will be added to the final product. A) Resource procurement B) Operations C) Outbound logistics D) Technology development E) Inbound logistics
Answer: E
46) If a firm determines it can use the percentage-of-sales method and it follows the procedure described in the textbook, then the net result is that each expense item on its income statement (with the exception of those items that can be individually forecast) will grow at the same rate as sales. This approach is called the: A) continuous percentage method of forecasting B) stable fraction method of forecasting C) regular proportion method of forecasting D) constant ratio method of forecasting E) steady percentage method of forecasting
Answer: D
46) ________ marketing is a low-budget approach to marketing that relies on ingenuity, cleverness, and surprise rather than traditional techniques. A) Rebel B) Bug C) Catching D) Guerrilla E) Revolutionary
Answer: D
47) A firm's pro forma financial statements are similar to its historical financial statements except that: A) they do not include the income statement B) they are required by the SEC in all cases C) they look back rather than forward D) they look forward rather than back E) they do not include the statement of cash flows
Answer: D
48) A firm's ________ is the limited group of individuals or businesses that it goes after or tries to appeal to. A) target objective B) goal objective C) intention market D) target market E) object market
Answer: D
50) Which of the following statements is untrue regarding a firm's sales process? A) A formal sales process helps a firm fine tune its approach to sales and build uniformity into the process. B) Following a formal or structured process to generate and close sales benefits a firm. C) A "sales process" is equally valuable whether a firm is selling directly to customers or through intermediaries. D) A firm's sales process depicts the steps it goes through to identify its target market. E) A formal sales process involves a number of identifiable steps.
Answer: D
6) For startup firms, the cost of buying real estate, building facilities, and purchasing equipment often exceeds the firm's ability to provide funds for those needs on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? A) lengthy product development cycles B) costs associated with building a brand C) cash flow challenges D) capital investments E) personnel costs
Answer: D
7) Peter Simmons owns an electronic games company. Although Peter's game designers and programmers are very good, it takes 2-3 years to develop a good electronic game. This example illustrates the need for funding or financing referred to as: A) personnel costs B) marketing costs C) costs associated with building a brand D) lengthy product development cycles E) cash flow challenges
Answer: D
8) Which of the following is not one of the four key forms of intellectual property protection? A) trade secrets B) copyrights C) trademarks D) innovations E) patents
Answer: D
9) A(n) ________ is the set of attributes—positive or negative—that people associate with a company. A) emblem B) logo C) symbol D) brand E) trade name
Answer: D
9) The ________ is the string of activities that moves a product from the raw material stage, through manufacturing and distribution, and ultimately to the end user. A) consequence sequence B) business chain C) meaning chain D) value chain E) worth procession
Answer: D
1) Metroleap Media, Inc., places music lyrics on the Internet. The major hurdle that Metroleap Media had to overcome to become a legitimate business was to: A) find ways to protect its trademark B) find ways to protect its trade secrets C) obtain a copyright on its Web site D) obtain a patent on the functionality of its Web site E) develop a protocol for obtaining licensing agreements from the music industry
Answer: E
1) Scripped, the company profiled in the opening feature for Chapter 9, offers Web-based screenwriting software. Which of the following statements best reflects Scripped's personnel policy? A) Scripped has hired aggressively and now has approximately 40 employees. B) Its three cofounders are its only employees. C) Scripped was founded by two UCLA MBA students and quickly grew to 10 employees. D) Its founder is its only employee. E) It has avoided building a large staff. Its formal employees consist of its three cofounders and an individual obtained in a merger.
Answer: E
10) Which of the following selections is incorrect regarding a firm's "positioning" strategy? A) Position is concerned with how the firm is situated relative to its competitors. B) A firm's decision about how to position itself relative to its competitors starts with a product or service idea that is tested and refined through feasibility analysis and marketing research. C) Position is concerned with how a firm is situated relative to competitors. D) Once a firm positions itself in a certain way, it must be able to follow through with a product or service offering that lives up to the image it has created. E) After selecting a positioning strategy, the firm's next step is to select a target market.
Answer: E
10) Which of the following statements is untrue regarding founding teams? A) The members of heterogeneous teams are diverse in terms of their abilities and experiences. B) The members of homogenous teams are very similar in terms of their abilities and experiences. C) Teams that have worked together before have an edge. D) Studies show that more than one individual starts 50 to 70 percent of all new firms. E) It is generally believed that new ventures started by an individual have an advantage over new ventures started by a team.
Answer: E
11) Peggy Owens owns a store that sells exercise equipment. Each January 1, she makes a very accurate account of all her merchandise and products waiting to be sold that are in her store. On January 1, Peggy is taking account of her store's: A) long-term assets B) owners' equity C) accounts payable D) accounts receivable E) inventory
Answer: E
13) Amy Clark just opened a soup and salad restaurant near Golden Gate Park in San Francisco. Rather than borrow money or raise funds from investors, Amy used her creativity and ingenuity and figured out how to get her business up and running without the need for external funding. Amy is utilizing a technique referred to as: A) networking B) reaching C) scrounging D) prospecting E) bootstrapping
Answer: E
14) A financial statement is a(n): A) set of ratios which depict relationships between a firm's financial items B) estimate of a firm's future income and expenses C) hybrid statement of cash flows D) itemized forecast of a company's income, expenses, and capital needs E) written report that quantitatively describes a firm's financial health
Answer: E
17) Amazon.com's one-click ordering system, Priceline.com's "name-your-price" business model and Netflix's method for allowing customers to set up a rental list of movies they want mailed to them are examples of: A) copyright extension patents B) utility patents C) business process protection patents D) trademark extension patents E) business method patents
Answer: E
17) ________ is the process in which an impartial third party helps those involved in a dispute reach an agreement. A) Conciliation B) Reconciliation C) Negotiation D) Appeasement E) Mediation
Answer: E
18) According to the textbook, a brand is all of the following except: A) reputation B) collection of memories C) a pledge D) a promise E) a written warranty
Answer: E
18) Which of the following statements is incorrect regarding equity funding? A) Equity investors expect to get their money back, along with a substantial capital gain, through the sale of their stock. B) Angel investors are a common source of equity funding. C) Equity funding is not a loan. D) Equity investors are very demanding. E) Equity investors fund the majority of the plans they consider.
Answer: E
18) ________ patents are the second most common type of patent and cover the invention of new, original, and ornamental designs for manufactured products. A) Aesthetic B) Utility C) Visual D) Blueprint E) Design
Answer: E
19) All businesses that plan to use a fictitious name, which is any name other than the business owner's name, need a(n): A) unreal business name permit B) fabricated business name permit C) invented business name permit D) conjured business name permit E) fictitious business name permit
Answer: E
19) Creating ________ means creating awareness and a sense of anticipation about a company and its offerings. A) ruckus B) noise C) clatter D) clamor E) buzz
Answer: E
19) ________ depict relationships between items on a firm's financial statements. A) Financial proportions B) Fiscal relations C) Fiscal projections D) Monetary balances E) Financial ratios
Answer: E
2) According to the textbook, the single most important thing the founders of an entrepreneurial venture can do is: A) start a board of advisors B) establish business partnerships C) make money D) select a limited liability corporation as opposed to an S-corporation E) establish a strong ethical culture for their firms
Answer: E
20) Which of the following set of characteristics places a startup in the strongest position to apply for equity funding? A) weak cash flow, high leverage, low-to-moderate growth, unproven management B) strong cash flow, low leverage, audited financials, good management, healthy balance sheet C) unique business idea, strong cash flow, low-to-moderate growth, broad market D) strong cash flow, high leverage, low-to-moderate growth, unproven management E) unique business idea, high growth, niche market, proven management
Answer: E
20) Which of the following statements is incorrect regarding the process of building a company's brand? A) A firm's name, logo, Web site design, and even its letterhead are part of its brand. B) One of the keys to effective branding is to create a strong personality for a firm. C) Some companies monitor the integrity of their brands through brand management. D) Startups must build a brand from scratch, which starts with selecting the company's name. E) Most experts recommend a heavy reliance on advertising in building a firm's brand.
Answer: E
20) ________ takes place when one party engages in the unauthorized use of another party's patent. A) Patent breach B) Patent encroachment C) Patent violation D) Patent infraction E) Patent infringement
Answer: E
21) A brief carefully constructed statement that outlines the merits of a business opportunity is called a(n): A) subway speech B) sway speech C) bootstrap speech D) teaser speech E) elevator speech
Answer: E
22) Which of the following are the primary elements of a startup's core strategy? A) target customer, fulfillment and support, pricing structure B) suppliers, partners, other key relationships C) pricing structure, suppliers, strategic assets D) core competencies, strategic assets, funding model E) mission statement, product/market scope, basis for differentiation
Answer: E
24) Apple for computers, Zeo for sleep aids, and Proactiv for acne medication are examples of: A) certifications B) copyrights C) patents D) trade secrets E) trademarks
Answer: E
25) "Organize all the world's information and make it universally accessible and useful" is Google's: A) function B) duty C) credo D) purpose statement E) mission statement
Answer: E
25) If a new venture organizes as a corporation, it is legally required to have a(n) ________, which is a panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm. A) board of advisors B) review team C) team of advisors D) accountability panel E) board of directors
Answer: E
26) Which financial statement records all of a firms revenues and expenses for a given period and shows whether the firm is making a profit or experiencing a loss? A) balance sheet B) owner's equity statement C) statement of cash flows D) forecast E) income statement
Answer: E
28) The panel of individuals who are elected by a corporation's shareholders to oversee the management of the firm is called the: A) board of advisors B) accountability panel C) advisory team D) panel of directors E) board of directors
Answer: E
3) The first step in selecting a target market is to study the industry in which the firm intends to compete and determine the different potential target markets in that industry. This process is called: A) market positioning B) market splitting C) market targeting D) market subdividing E) market segmentation
Answer: E
3) Which of the following is not an example of intellectual property? A) Proactiv's formula for acne medication B) Google's trademark C) the Internet domain name www.nytimes.com D) Microsoft's Windows operating system E) a computer mouse
Answer: E
43) A(n) ________ is a written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for payments. A) assurance B) loan C) guarantee D) warranty E) lease
Answer: E
30) A ________ sets forth the rights and duties of the general partners and limited partners, along with the details of how the partnership will be managed and eventually dissolved. A) partnership accord B) restricted partnership agreement C) business partnership agreement D) limited partnership concurrence E) limited partnership agreement
Answer: E
31) A trademark is registered with the: A) U.S. Commerce Department B) Federal Trade Commission C) Securities and Exchange Commission D) Federal Patent, Copyright, and Trademark Office E) U.S. Patent and Trademark Office
Answer: E
32) A form of intellectual property protection that grants to the owner of a work of authorship the legal right to determine how the work is used and to obtain the economic benefits from the work is referred to as a(n): A) assurance document B) patent C) trade secret D) brand E) copyright
Answer: E
32) A separate legal entity organized under the authority of a state is referred to as a: A) limited partnership B) conglomerate C) general partnership D) sole proprietorship E) corporation
Answer: E
32) The Savvy Entrepreneurial Firm feature in Chapter 8 focuses on a scenario involving the selection of a new CEO for New Venture Fitness Drinks. The lesson learned from the feature was: A) compare a firm's financial ratios against its primary competitors and industry norms to fairly assess how well a firm is performing financially B) income statements are more effective in assessing how well a firm is performing financially than are balance sheets and statements of cash flow C) the most powerful instrument for understanding how well a firm is performing financially is the statement of cash flows D) ratio analysis is ineffective E) look at multiple years of an income statement rather than a single year to fairly assess how well a firm is performing financially
Answer: E
33) Keith Barnes is a general partner in a venture capital firm that just funded South Florida Software, a software firm in Coral Gables, Florida. South Florida Software is incorporated, and Keith has taken a seat on the firm's board of directors. In board of directors terminology, Keith is a(n): A) subordinate director B) senior director C) distant director D) inside director E) outside director
Answer: E
33) The first sale of stock by a firm to the public is referred to as a(n): A) original public submission B) first unrestricted offering C) preemptive initial offering D) original open offering E) initial public offering
Answer: E
34) Copyright law is governed by the: A) U.S. Constitution B) the 1946 Intellectual Property Act C) the 1966 Trademark and Copyright Act D) the 1955 Inventors and Writer's Protection Act E) Copyright Revision Act of 1976
Answer: E
36) A board of directors has three formal responsibilities: appoint the officers of the firm, declare dividends, and: A) write the firm's strategic plan B) conduct the annual meeting C) provide funding for the firm D) represent the firm in public relations activities E) oversee the affairs of the corporation
Answer: E
36) Debt financing involves: A) raising venture capital or securing a private placement B) selling corporate bonds or selling stock via an IPO C) getting a grant or selling corporate bonds D) getting a loan or raising venture capital E) getting a loan or selling corporate bonds
Answer: E
36) Michael Jones owns a Web design firm. The way Michael prices his products is to determine what consumers are willing to pay, and then he backs off a bit to provide a cushion. The method that Michael used to determine his prices is called: A) predatory pricing B) technical pricing C) cost-based pricing D) competitive-based pricing E) value-based pricing
Answer: E
37) Historically, commercial banks: A) have been a good source of funds for startup firms B) have not funded startup firms at all C) have been a good source of funds for manufacturing firm startups but not for service firm startups D) have been a good source of funds for service firm startups but not for manufacturing firm startups E) have not been a good source of funds for startup firms
Answer: E
38) A firm's ________ is its current assets divided by its current debt. A) working share B) present share C) working capital D) owners' equity E) current ratio
Answer: E
38) According to current regulations, any copyrightable work created on or after January 1, 1978, is protected by copyright law for the life of the author plus: A) 28.5 years B) 101 years C) 40 years D) 55 years E) 70 years
Answer: E
39) A corporation is formed by filing ________ with the Secretary of State's office in the state of incorporation. A) certificate of intent to incorporate B) articles of business C) corporate credentials D) a corporation permit E) articles of incorporation
Answer: E
39) A supplier is a company that: A) purchases a company's products B) helps a firm put together its network of contacts C) provides startups with funding D) provides startups with business advice E) provides parts or services to another company
Answer: E
4) The four main financial objectives of a firm are: A) efficiency, effectiveness, strength, and flexibility B) power, success, efficiency, and effectiveness C) control, effectiveness, liquidity, and power D) success, strength, liquidity, and profitability E) profitability, liquidity, efficiency, and stability
Answer: E
40) The statement of cash flows is divided into three separate activities: A) profitability activities, stability activities, and investing activities B) stability activities, earning activities, and financing activities C) operating activities, capital activities, and liquidity activities D) spending activities, earning activities, and capital activities E) operating activities, investing activities, and financing activities
Answer: E
42) An arrangement between two or more firms that establishes an exchange relationship but has no joint ownership involved is called a: A) network B) trade association C) consortia D) joint venture E) strategic alliance
Answer: E
42) In a ________, the voting stock is held by a small number of individuals and is very thinly or infrequently traded. A) public corporation B) private corporation C) narrow corporation D) cautious public corporation E) closely held corporation
Answer: E
55) The owner of a patent is granted a legal monopoly for an unlimited period of time.
Answer: FALSE
45) Amy Phillips founded a cosmetics firm several years ago. Her firm has grown rapidly and is financially successful. One thing that Amy attributes her success to is that early on she assembled a panel of experts who provided her ongoing direction and advice about her business. What Amy created is called a(n): A) consultation panel B) suggestion panel C) idea board D) accountability panel E) advisory board
Answer: E
45) The federal Economic Espionage Act, passed in 1996, criminalizes: A) copyright infringement B) utility patent violations C) trademark violations D) design patent violations E) the theft of trade secrets
Answer: E
45) ________, a relatively new approach to partnering, takes place when a service provided comes inside a partner's facilities and helps the partner design and manage its supply chain. A) Permeating B) Infiltrating C) Penetrating D) Fulfilling E) Insourcing
Answer: E
47) A(n) ________ is a route a product takes from the place it is made to the customer who is the end user. A) trade channel B) product channel C) allotment channel D) promotion channel E) distribution channel
Answer: E
49) Consider the following questions: Are products under development that require patent protection? Are we in compliance with the copyright license agreements into which we have entered? Is anyone infringing on our trademarks? Are company trade secrets leaking out to competitors? These are the types of questions that would be asked when conducting a(n): A) intangible material examination B) intellectual property inventory C) intangible material inspection D) patent, trademark, copyright, and trade secret review E) intellectual property audit
Answer: E
49) The Partnering for Success feature in Chapter 9 focuses on iConclude, a company that set up a customer advisory board. The main point of the feature is: A) the proper time to set up a customer advisory board is just after a business has been launched B) the members of a firm's customer advisory board should be as diverse as possible C) a customer advisory board can be a good source of new product or service ideas D) the main purpose of a customer advisory board is to assess customer satisfaction E) setting up a customer advisory board before a business is launched can be a useful way of getting feedback while a product is being developed
Answer: E
50) The What Went Wrong? feature in Chapter 10 focuses on GoCrossCampus, a company that developed a strategy game in which students from opposing schools competed online to conquer each other's campuses. Which of the following was not identified as one of the reasons that led to GoCrossCampus's failure? A) The company never generated the revenue it needed to be a viable ongoing business. B) The fund-raising process was time-consuming. C) Products were released quickly, and in some cases before they were ready. D) Having five cofounders proved to be problematic. E) The company was never able to raise investment capital.
Answer: E
50) Which of the following is incorrect regarding the typical role of consultants in business startups? A) give professional advice B) international consulting firms, like Accenture and Bearing Point, are financially beyond the reach of most small firms C) consultants fall into two categories: paid consultants and consultants who are made available for free D) give expert advice E) help manage the day-to-day activities of the firm
Answer: E
7) "Don't be evil" is the corporate motto for: A) Facebook B) Twitter C) Zynga D) Apple Inc. E) Google
Answer: E
8) For startup firms, some products are under development for years before they generate earnings. The upfront costs often exceed a firm's ability to fund these activities on its own. Which of the following reasons that motivate firms to seek funding or financing is illustrated in this example? A) cash flow challenges B) marketing costs C) capital investments D) personnel costs E) lengthy product development cycles
Answer: E
8) Research in Motion (RIM) is a handheld computer company that focuses specifically on business users that need dependable access to e-mail and the Internet while away from their office. For RIM, this specific type of user within the large business market segment is referred to as its: A) gap market B) task market C) position market D) hole market E) niche market
Answer: E
9) A grant from the federal government conferring the rights to exclude others from making, selling, or using an invention for a specific period of time is referred to as a(n): A) trademark B) copyright C) idea secret D) innovation E) patent
Answer: E
9) According to our textbook, the seed money that gets a company off the ground typically comes from: A) angel investors B) venture capitalists C) commercial banks D) governmental agencies E) the founders of the firm
Answer: E
51) A business plan is a firm's plan or diagram for how it competes, uses its resources, structures its relationships, interfaces with customers, and creates value to sustain itself on the basis of the profits it earns.
Answer: FALSE
52) A firm's business model resides within its own boundaries.
Answer: FALSE
52) Efficiency is the ability to earn a profit.
Answer: FALSE
52) Patents, trademarks, copyrights, and licenses are the four key forms of intellectual property.
Answer: FALSE
52) The most important thing that any entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization is to hire an aggressive attorney.
Answer: FALSE
52) The proper sequence in selecting a target market and positioning strategy is (1) craft a unique positioning strategy, (2) select a target market, and (3) segment the market.
Answer: FALSE
52) Typically, the seed money that gets a company off the ground comes from a commercial bank.
Answer: FALSE
53) Stability is a company's ability to meet its short-term financial obligations.
Answer: FALSE
53) Studies show that more than one individual starts 80 to 90 percent of all new firms.
Answer: FALSE
54) It is generally believed that new ventures started by an individual have an advantage over those started by a team.
Answer: FALSE
54) The average time for the approval of a patent is 19 months.
Answer: FALSE
