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Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 1 Entrepreneurs: The Driving Force Behind Small Business 1) The nation is rapidly moving from: A) industrial to capitalism. B) capitalism to industrial. C) industrial to knowledge-based. D) None of the […]

41) Money driven and wild risk takers are both: A) common characteristics of entrepreneurs. B) entrepreneur’s techniques to success. C) common misconceptions of entrepreneurs. D) None of the above Topic: What is an Entrepreneur? AACSB: Communication 42) “Copreneurs” are: A) […]

73) Although it is a lower risk way to start, very few entrepreneurs start part-time. Most prefer to cut all ties and “dive” into their business full-time, right from the start. Topic: The Cultural Diversity of Entrepreneurship AACSB: Communication 74) […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 2 Ethics and Social Responsibility: Doing the Right Thing 1) ________ are the various groups and individuals who affect and are affected by a business. A) Consequentialists B) Workers C) Stakeholders […]

40) ________ is any unwelcome sexual advance, request for sexual favors, and other verbal or physical sexual conduct made explicitly or implicitly as a condition of employment. A) Hostile harassment B) Quid pro quo harassment C) Non-employee sexual harassment D) […]

86) The most effective way of diminishing moral blindness is through training. Topic: Moral Blindness AACSB: Ethical Reasoning 87) Since ethical standards are constant from one culture to another, ethical decisions pose no special problems for companies engaged in international […]

125) The United States Supreme Court changed the nature of an employer’s liability for sexual harassment, rejecting the previous standard that the employer had to be negligent somehow to be liable for a supervisor’s improper behavior toward employees. Topic: Sexual […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 3 Creativity and Innovation: Keys to Entrepreneurial Success 1) ________ is the ability to develop new ideas and to discover new ways of looking at problems and opportunities. A) Showboating B) […]

41) ________ is finding something while looking for something else. A) Tenacity B) Ambiguity C) Opportunity D) Serendipity Topic: Enhancing Individual Creativity AACSB: Reflective Thinking 42) “________ points” are missing products or services or flaws in existing products or services. […]

77) Left-brain people see mistakes as mere “pit stops” on the way to success. Topic: Creative Thinking AACSB: Reflective Thinking 78) Right-brain people realize that there may be more than one “right answer.” Answer: TRUE Page Ref: 79 Topic: Creative […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 4 Strategic Management and the Entrepreneur 1) The strategic management process: A) is especially difficult for the small business because of its limited resources. B) divides mass markets into smaller, less […]

41) Small bookstores have a giant killer of a competitive advantage in their: A) lower costs. B) better locations. C) customer service. D) large selection. Topic: Building a Competitive Advantage AACSB: Analytic Skills 42) When translating strategic plans into action […]

88) Offering lower prices is the best method for a small business to establish its competitive edge. Topic: The Strategic Management Process, Step 7 AACSB: Analytic Skills 89) The focal point of the entire strategic plan and the competitive strategy […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 5 Choosing a Form of Ownership 1) The key to choosing the “right” form of ownership is: A) knowing the cost factor in time and money. B) understanding how each form […]

41) An S-corporation form of ownership overcomes which disadvantage of the regular or “C” corporation form of ownership? A) The double taxation issue B) The expense and difficulty of formation C) The amount of regulation and red tape involved in […]

91) The Uniform Partnership Act covers three elements of a partnership; the common ownership interest, sharing profits or losses, and management participation rights. Topic: Uniform Partnership Act AACSB: Analytic Skills 92) There is no legal limit to the number of […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 6 Franchising and the Entrepreneur 1) In franchising, a ________ pays fees and royalties to a ________ in return for the right to sell its products or services under the franchiser’s […]

41) When franchise contracts are renewed: A) the existing contract is merely annotated and signed by both parties. B) a new UFOC must be issued. C) all terms of the previous contract may be renegotiated. D) a new contract must […]

86) Do not heed any information gathered from past franchisees, because they will distort the reasons why they left the franchise. Topic: The Right Way to Buy a Franchise AACSB: Analytic Skills 87) Most often, disputes over a franchise contract […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 7 Buying an Existing Business 1) When buying an existing business, the potential buyer should remember that: A) it is a long process and the buyer should be patient. B) existing […]

41) The mechanics of most small business sales involve: A) a cash buyout with no financing. B) a down payment with a note carried by the seller. C) no down payment with a note carried by the seller. D) an […]

91) Ralph buys a software business from Waldo in Columbus, Ohio. As part of the deal, Waldo signs a covenant not to compete by opening another software business anywhere in Ohio for the rest of his life. Such a covenant […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 8 New Business Planning Process: Feasibility Analysis, Business Modeling, and Crafting a Winning Business Plan 1) For entrepreneurs, a business plan is: A) a systematic, realistic evaluation of a venture’s chances […]

41) Any assets pledged to the bank as security for repayment of the loan are the ________ of the five Cs. A) collateral B) capacity C) capital D) conditions Topic: What Lenders and Investors Look for in a Business Plan […]

87) Defining the target market is one of the hardest and most important things the entrepreneur can do in the business plan. Topic: The Elements of a Business Plan AACSB: Analytic Skills 88) Some feel the worst mistake an entrepreneur […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 9 Building a Bootstrap Marketing Plan 1) A business plan for the small business owner: A) is of relatively little importance due to the dynamic nature of the marketplace. B) is […]

41) Time compression management (TCM) involves: A) speeding new products to market. B) enhancing the quality of existing products. C) decreasing the time it takes a product to move from introduction to the maturity stage of the product life cycle. […]

87) Since front-line service workers are not able to predict the causes of customer complaints, managers must be the ones to identify potential customer service problems. Topic: Focus on the Customer AACSB: Analytic Skills 88) Perhaps the worst of all […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 10 Creative Use of Advertising and Promotion 1) In reality, advertising: A) is a “luxury expense” to be undertaken only when the budget permits. B) requires a large budget to be […]

41) Under the ________ method of establishing an advertising budget, the owner sees advertising as a luxury. A) what-is-affordable B) matching competitors C) percentage of sales D) objective-and-task Topic: How to Prepare an Advertising Budget AACSB: Analytic Skills 42) The […]

92) The key to the success of a direct mailing campaign is the accuracy of the customer list. Topic: Media Options AACSB: Analytic Skills 93) Due to the low cost, most small businesses rely almost solely on outdoor/billboard advertising. Answer: […]

128) List and explain the questions a small business owner needs to answer when choosing a media vehicle for the advertising message. Topic: Selecting Advertising Media AACSB: Analytic Skills 27 Copyright © 2015 Pearson Education, Inc. Answer: ∙How large is […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 11 Pricing and Credit Strategies 1) Tom is working on a pricing strategy for his company’s new product line. In order to determine the price ceiling for these products, Tom needs […]

41) ________ costing includes only those costs that vary directly with the volume of an item produced. A) Absorption B) Break-even C) Indirect D) Direct Topic: Pricing Techniques for Manufacturers AACSB: Analytic Skills 42) ________ tells what portion of the […]

86) A skimming pricing strategy permits a small business owner to correct pricing mistakes more quickly and easily than a penetration pricing strategy. Topic: Pricing Strategies and Tactics, Skimming AACSB: Analytic Skills 87) A penetration pricing strategy allows the business […]

126) Before deciding to use credit as a competitive weapon, small business owners must make sure that the firm’s cash position is strong enough to support additional pressure. Topic: The Impact of Credit on Pricing, Trade Credit AACSB: Reflective Thinking […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 12 Global Marketing Strategies 1) ________ is (are) said to link trading partners, whether they are giant corporations or single individuals with a small business. A) Technology B) Better management C) […]

40) John wants to expand into the foreign markets, but he can’t convince his partners. They feel international markets are the domain of large corporations. John is facing which barrier to international trade? A) Financing B) Political C) Cultural D) […]

88) The Commercial Service International Contacts List (CSIC) and the Country Directories of International Contacts (CDIC) provide the same information but organized in different ways. Topic: Resources for Locating a Trade Intermediary AACSB: Analytic Skills 89) One way to avoid […]

127) A letter of credit reduces the financial risk for the exporter by substituting a bank’s creditworthiness for that of the purchaser. Topic: Exporting AACSB: Analytic Skills 128) A letter of credit is a document the seller draws on the […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 13 E-Commerce and Entrepreneurship 1) ________ is a trend where people test products in retail stores but buy them online. A) Showboating B) Commoditizing C) Onlining D) Showrooming Topic: Introduction AACSB: […]

41) Which of the following is correct? A) Although fancy graphics, bright colors, playful music, and spinning icons can attract attention, they also can be quite distracting and very slow to download. B) Sites that download slowly may never have […]

81) The three-digit number above the signature panel on the back of the credit card is referred to as CCV or CCV2. Topic: Ensuring Web Privacy and Security AACSB: Use of IT 82) The average conversion rate is about 10 […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 14 Creating a Solid Financial Plan 1) A pro forma financial statement means: A) looking at the current financial statement. B) looking at the past financial statement. C) preparing the current […]

41) ________ publishes key business ratios for over 800 business categories. A) Robert Morris Associates B) Boston Consulting Group C) Bank of America D) Dun and Bradstreet, Inc. Topic: Interpreting Business Ratios AACSB: Analytic Skills 42) ________ publishes Annual Statement […]

93) A low inventory turnover ratio demonstrates that the firm’s inventory is liquid and its pricing policies are accurate. Topic: Twelve Key Ratios; Operating Ratio AACSB: Analytic Skills 94) The company’s average collection period ratio indicates the length of time […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 15 Managing Cash Flow 1) The first step in managing cash more effectively is: A) having an adequate cash reserve for emergency expenditures. B) rapid payment of accounts payable. C) speeding […]

41) The real benefit of barter for the entrepreneur is that: A) it is essentially without cost to the business owner. B) it is considered a depreciable item for tax purposes rather than as income. C) it saves the small […]

92) According to the National Association of Credit Management, receivables are only the second most important item on the balance sheet. Topic: Accounts Receivable AACSB: Analytic Skills 93) The first line of defense against bad debt losses is to have […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 16 Sources of Equity Financing 1) The credit crunch has hit those entrepreneurs seeking between $100,000 and ________. A) $3 million B) $500,000 C) $1 million D) $750,000 Topic: Introduction AACSB: […]

41) One of the reasons for the significant drop in the number of public offerings since 2001 is: A) the dot-com crash of 2000. B) the U.S. economic crisis. C) the global economic meltdown. D) lack of available float. Topic: […]

95) A firm commitment underwriting agreement essentially guarantees that the small company making the initial public offering will receive the funds it needs. Topic: Public Stock Sale AACSB: Analytic Skills 96) The reason Joe Falsetti couldn’t get investors interested in […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 17 Sources of Debt Financing 1) Sometimes small businesses have to use debt financing instead of equity financing. When they do, they discover that: A) banks give them a lower interest […]

41) When a bank makes enough good SBA-guaranteed loans to become a ________ lender, the SBA promises a faster turnaround time for the loan decision—typically 3 to 10 business days. A) preferred B) qualified C) certified D) LDC Topic: Small […]

93) Insurance companies specialize in long-term loans. Topic: Insurance Companies AACSB: Analytic Skills 94) Some credit unions are now extending personal loans to members, often without personal collateral, in order to start a business. Answer: TRUE Page Ref: 563 Topic: […]

133) CAPs are designed to encourage lending institutions to make loans to businesses that do not qualify for traditional financing. Topic: State and Local Development Programs AACSB: Analytic Skills 134) Typically, factoring is less expensive than bank and commercial finance […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 18 Location, Layout, and Physical Facilities 1) The secret to selecting the ideal location for a business is: A) the available labor pool for the business. B) knowing the customer and […]

41) Signs are important to the small business owner because they: A) grow in effectiveness the longer they are in place. B) are easy to use and to change. C) provide the maximum space for relatively complex messages. D) are […]

83) The purpose for establishing incubators is enhancing economic development while grouping similar types of businesses into a consolidated economy. Topic: Business Incubators AACSB: Analytic Skills 84) Poorly planned layouts undermine employee productivity and create organizational chaos. Answer: TRUE Page […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 19 Supply Chain Management 1) The primary objective of the purchasing function is to: A) ensure an adequate turnover of merchandise. B) acquire enough stock to ensure uninterrupted sales or production. […]

40) The creation of a vender certification program requires: A) a vendor rating scale developed by the company. B) a firm price list from the vendor, good for three years. C) membership in the SBA vendor certification program. D) understanding […]

84) When implementing TQM, managers should remember that change and turmoil are essential elements of the implementation. Topic: Total Quality Management AACSB: Analytic Skills 85) The inventory investment is usually the largest single investment for a small firm. Answer: TRUE […]

132) Discuss the purchasing plan, briefly describing each of the five key elements of the plan. Answer: Purchasing involves the acquisition of needed materials, supplies, services, and equipment of the right quality, in the proper quantities, for reasonable prices, at […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 20 Managing Inventory 1) For most retailers and wholesalers, the investment in ________ is the largest capital outlay next to payroll. A) office equipment, computers, etc. B) vehicles, automobiles and trucks […]

41) A number of organizational factors encourage employee theft including: A) being permitted to manage their own work and time schedules. B) working with one-of-a-kind items the employee could never afford to buy. C) having too elaborate of financial and […]

89) Total inventory costs are reduced when the small business manager spends her time and effort controlling items that represent the greatest inventory value. Topic: The ABC Method of Inventory Control AACSB: Analytic Skills 90) Choosing the most appropriate system […]

127) Although only about 15 percent of shoplifters are professionals, they can severely damage a business. Topic: Types of Shoplifters AACSB: Analytic Skills 27 Copyright © 2015 Pearson Education, Inc. Answer: TRUE Page Ref: 693 128) Inventory management involves seven […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 21 Staffing and Leading a Growing Company 1) The process of influencing and inspiring others to work to achieve a common goal and then giving them the power and freedom to […]

41) Jackson is comparing this month’s operational costs, productivity, accident rate, etc., to the goals his boss set with him at the beginning of the year. Jackson is at what point in the feedback loop? A) Comparing performance against standards […]

98) Job sharing is a work arrangement in which employees work at a place other than the traditional office, such as a satellite branch closer to their homes or, in some cases, at home. Topic: Job Design AACSB: Analytic Skills […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 22 Management Succession and Risk Management Strategies in the Family Business 1) The essential quality for a family business that shows a recognition that decisions should be left to the person […]

38) Life insurance differs from all other types of insurance in that: A) it cannot be purchased by the one who benefits from the loss. B) it does not pertain to avoiding risk. C) it is federally insured. D) it […]

79) The preparation of a successor is a two-way process, showing the direction of the business and what led to its success, but also learning and listening. Topic: Management Succession AACSB: Analytic Skills 80) Even though the owner has stepped […]

Entrepreneurship and Effective Small Business Management, 11e (Scarborough) Chapter 23 The Legal Environment: Business Law and Government Regulation 1) Something of legal value that the parties exchange as part of a bargain. A) Contract B) Legality C) Agreement D) Consideration […]

39) Billy Bob’s swamp racers are the fastest swamp mud racing machines in the country. Unfortunately drivers have to be careful because they are easily tipped over due to their high center of gravity. This is unfortunate because most swamp […]

88) Today, the marketplace follows a policy of caveat venditor—”Let the seller beware.” Topic: Breach of Sales Contracts AACSB: Analytic Skills 89) An express warranty can be created by words or by actions. Answer: TRUE Page Ref: 792 Topic: Sales […]