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One element of the location decision common to all businesses is the need to locate where customers want to do business. The ideal strategic planning process for a small company should start with setting objectives. Answer: FALSE Small companies that […]

“Gazelles” are those businesses that grow at 20 percent or more per year for four years and gross at least $100,000 in annual sales. Viewing play as frivolous is a mental block that stifles creativity. Answer: TRUE One effective technique […]

You should never offer your customers “freebies” unless they are truly valuable and expensive, otherwise you will earn a negative reputation among your customers. Online sales and Internet activity will account for more than 60 percent of total retail sales. […]

The franchisee turnover rate is the rate at which franchisees leave a franchise system. An entrepreneur may find that the business plan indicates that the business concept is not viable. This is another potential benefit of writing a business plan; […]

After a company’s strengths and weaknesses are assessed, the strategic planning process should identify opportunities and threats facing the company and should isolate the key factors for success in business. Only about one-third of the world’s purchasing power lies outside […]

Dumping involves selling large quantities of a product in a foreign market below cost. An inventory turnover ratio above the industry average suggests that a business is overstocked with obsolete, stale, overpriced, or unpopular merchandise. Answer: FALSE For many entrepreneurs, […]

Companies quickly learn that setting up a Web site is only the first investment required. The site leads to an ongoing investment of resources – time, money, energy and talent. The sole proprietorship is the best form of ownership for […]

The Lifestyle Market Analyst matches population demographics with age. The increasing diversity of our population is creating a marketing “threat” to small businesses because they cannot profitably serve small niches. Answer: FALSE Market research is a valuable tool for defining […]

When conducting a regional evaluation, one of the first places an entrepreneur should turn for information is the U.S. Census Bureau. Using focus groups is an example of primary research. Answer: TRUE Because of their size and limited resources, small […]

Women now own 30.4 percent of all privately-held businesses in the United States. Potential lenders and investors believe that an entrepreneur who lacks the discipline to develop a good business plan likely lacks the discipline to run a business. Answer: […]

Secondary research includes customer surveys. One of the rights given to consumers by the Consumer Bill of Rights is the right to safety. Answer: TRUE The mission statement addresses the first question of any business venture: “What business am I […]

Interviewers should avoid asking job candidates questions based on hypothetical on-the-job scenarios and how the candidate would handle them because the Equal Employment Opportunity Commission considers such questions to be illegal. The objectives of cash management are to adequately meet […]

The right brain is guided by linear, vertical thinking. The U.S. Copyright Office does not require registering the creative work because registering it does not give creators greater protection over their work. Answer: FALSE Entrepreneurs realize that failure is a […]

TRIZ is an acronym for a systematic approach to help solve technical problems based on the study of hundreds of the most innovative patents. A feasibility analysis consists of four interrelated components: an industry and market feasibility analysis, a product […]

The manufacturer’s suggested price takes into account the small firm’s cost structure and its competitive situation. The faster a small company grows, the greater its appetite for cash. Answer: TRUE Employees tend to rise or fall to the level of […]

The Uniform Franchise Disclosure Document (UFDD) is a document that every franchisor is required by law to give prospective franchisees before any offer or sale of a franchise. Because the heart of the cash budget is the sales forecast, the […]

Driving around and observing competition is called “windshield” research. In a recent survey, 92 percent of consumers say that given the opportunity, they would buy products with a social and/or environmental benefit. Answer: TRUE The most effective technique by which […]

The purpose of a feasibility study is to determine whether a business idea is worth pursuing. Equity capital is also called risk capital because these investors assume the primary risk of losing their funds if the business fails. Answer: TRUE […]

Float is the net number of days of cash flowing into or out of a company. The business plan helps an entrepreneur assess ideas in a relatively short period of time. Answer: FALSE The rapidly accelerating rate of change has […]

The reality test that a business plan must pass to attract financing from lenders and investors involves proving that a market for the company’s product or service actually does exist, and that the company actually can build it for the […]

Because inventory is not a liquid asset, cash invested there is tied up and cannot be used for other purposes. About 75 percent of the businesses in the U.S. can be considered ‘small” businesses. Answer: FALSE A corporation formed in […]

A tariff is a limit on the amount of a product imported into a country. Developing a cash forecast is essential for new businesses because early profit levels usually do not generate sufficient cash to keep the company afloat. Answer: […]

A security agreement is a contract in which a business selling an asset on credit gets a security interest in that asset, protecting its legal rights in case the buyer fails to pay. When investing surplus cash, the small business […]

When filing the corporate charter, a corporation must file in the state in which its headquarters are located. To manage cash efficiently, business owners should strive to accelerate their accounts payable and stretch out their accounts receivable. Answer: FALSE Company […]

Corporations must obtain a federal charter before they can conduct any business. In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership. Answer: FALSE A job analysis describes the process […]

The Business Model Canvas consists of six elements. NAFTA includes provisions reducing tariff and nontariff barriers and toughening health and safety standards. Answer: TRUE Rather than relying primarily on a single source of funds as they have in the past, […]

Small business owners should not press customers for payment of their past due accounts for fear of losing them as customers altogether. Alarmingly, 66 percent of all drug abusers and 77 percent of alcohol abusers are employed. Answer: TRUE Leadership […]

Small companies have created at least two-thirds of the net new jobs in the U.S. economy. Entrepreneurs build the foundation for ethical decision making by understanding how their personal values come to life in business situations. Answer: TRUE Social responsibility […]

The Business Model Canvas is a dynamic framework to guide entrepreneurs through the process of developing, testing, and refining their business models. Job enlargement is based on the premise that the best way to design a job is to break […]

The principle of job enlargement is to make a job more varied and to allow employees to perform a more complete unit of work by broadening its scope. The strongest of the five forces in most industries is the rivalry […]

Too many marketing plans describe in great detail what an entrepreneur intends to accomplish and pay little, if any, attention to practical and affordable strategies to achieve those targets. Market research requires a business owner to define the objective, collect […]

Generally, an industry is more attractive when the items suppliers provide the industry account for a relatively high portion of the cost of the industry’s finished product. A patent gives the inventor the exclusive right to make, use, or sell […]

A typical venture capital firm seeks investments in the $20,000 to $50,000 range and annual returns of 35-50 percent over three to five years. Immoral managers purposely violate law and ethical standards. Answer: FALSE A company’s mission statement defines what […]

Minority-owned businesses have come a long way in the past decade, and their success rate is climbing. By signing the franchise contract, a franchisee typically surrenders some freedom and autonomy in operating her/his business. Answer: TRUE About 20 percent of […]

The greatest opportunities for e-commerce lie in the retail sector. Most stores find it most practical to use a flexible markup, which assigns various markup percentages to different types of products. Answer: FALSE Choosing a location in which many other […]

The executive summary serves as the thesis statement for the entire business plan. Captive-product pricing is a technique that involves selling a product for a low price and charging a higher price for the accessories that accompany it. Answer: FALSE […]

Roughly 80 percent of the typical business’ inventory turns over quickly. Diversity may be considered a characteristic of entrepreneurs, as they don’t fit any statistical norm. Answer: TRUE Only about 20 percent of a typical business’ inventory turns over quickly. […]

Actions that are legal, however, may not be ethical. Creditors often look for a times-interest-earned ratio of at least 4:1 to 6:1 before pronouncing a company a good credit risk. Answer: TRUE The Web is one of the most efficient […]

The best pricing strategy for a small business owner to follow is to charge the manufacturer’s suggested retail price. Employee assistance programs (EAPs) are an effective weapon in the battle against workplace substance abuse. Answer: TRUE The Foreign Corrupt Practice […]

Specialized knowledge is an example of a barrier to entry. To be effective, the small business owner should limit strategic analysis to only the two or three most significant opportunities facing the firm. Answer: TRUE To project cash receipts, an […]

In 2020, members of three different generations will be working side by side in the United States. Zoning is a system that divides a city or country into small cells or districts to control the use of land, buildings, and […]

The “friendliness” of the overall business environment is an important consideration in location selection and information is available to offer objective insight for this assessment. The first phase in selecting a location is determining what regions of the country are […]

Although creativity sometimes involves generating something from nothing, it more likely results in elaborating on the present, putting old things together in new ways, or taking something away to create something simpler or better. The value test that a business […]

Studies comparing large companies to small ones have found that large companies’ inability to react quickly is a major barrier to their growth. By using bootstrap marketing strategies (unconventional, low-cost, creative techniques) small companies can get as much “bang” for […]

When the SBA makes a loan guarantee, banks are willing to consider riskier deals that they normally would refuse. Workers believe the actions of those in charge more than their words. Answer: TRUE On the income statement, the cost of […]

Before your Web site can become the foundation of a successful e-business, you must create it with your target audience in mind. The most effective job interviews are unplanned, unstructured interactions between the small business owner and the job applicant. […]

The most effective business plans follow the “cookie cutter approach,” following the standard format most preferred by lenders and investors. Narrower product lines, smaller customer bases, and more limited geographic areas give small companies a natural advantage over large businesses […]

The prices a small business charges influence its image in the marketplace. Capital requirements, estimate earnings, and return on investment are three aspects of the financial feasibility analysis. Answer: TRUE Globally, one in eight adults is actively engaged in launching […]

Generally, an industry is more attractive when substitute products are available for the items suppliers provide. Changing your firm’s shipping terms from “F.O.B. buyer” to “F.O.B. seller” can improve your cash flow, as it switches the cost of shipping from […]

Trust is the foundation on which the long-term customer relationships that are so crucial to the Web success are built. Most entrepreneurs have invested the time to develop a sound business plan. Answer: FALSE Most franchisors provide extensive financial help […]

Most small businesses begin their global ventures by establishing international locations. Effective leaders know that what they do is more important than what they say because they set the example for their employees. Answer: TRUE One of the disadvantages of […]

Because small business owners often rely on informal procedures for managing cash, they are most likely to become victims of embezzlement and fraud by their employees. Comparing a company’s current income statement to those of prior accounting periods rarely reveals […]

Export trading companies are government-owned operations established in countries around the world (including the United States) for the purpose of buying goods there. The balance sheet provides owners with an estimate of the firm’s worth for a specific moment in […]

A small business whose sales are highly variable, such as a seasonal business, should use a short cash planning horizon. The most reliable method of determining an adequate minimum cash balance is using estimates of similar businesses from trade literature. […]

The Dictionary of Occupational Titles, a listing of more than 20,000 job titles and descriptions, is a useful tool for getting a small business owner started when writing job descriptions. The “right” price depends on one factor – the value […]

Employees are at the heart of increases in productivity. Successful entrepreneurs come up with ideas and then find ways to make them work to solve a problem or fill a need. Answer: TRUE Generally, an industry is more attractive when […]

Research has isolated a set of characteristics that can predict who will succeed as an entrepreneur. A small business owner can collect a great deal of information about competitors through a number of low-cost competitive intelligence methods. Answer: TRUE One […]

Some financial analysts recommend that new owners estimate cash disbursements as best they can and then add another 25 to 50 percent of the total. A strong leader does not share aspects of his or her company’s financial health, its […]

Foreign licensing is when a business buys and sells products in many countries, either in its own name, or as an agent for its buyer-seller clients. Adding innovative products and services is important to a companies’ success and small entrepreneurial […]

One study conducted by the Global Entrepreneurship Monitor (GEM) reports that nearly one in eight people in the United States is working to start a business. Companies lose billions of dollars each year due to employee theft. Answer: TRUE Most […]

Most home-based businesses are simple cottage industries such as crafts or sewing. Trademarks are distinctive words, symbols, designs, names, or logos used for company identification. Answer: TRUE Effective leaders know they must punish workers who take risks and fail so […]

While most people see what they have always seen, creative entrepreneurs are able to see beyond preconceptions. In a cash budget, credit sales to customers are recorded at the time the sale is made. Answer: FALSE Flextime is a work […]

Communication in a timely and professional manner is key to effective collection activities. As the domestic market for franchises has become increasingly saturated with outlets, the number of franchisers attracted to foreign markets has grown. Answer: TRUE The opportunity to […]

One of the cautions with a niche strategy is that niches change. Even though cost-plus pricing is simple, it does not encourage a small business to use its resources efficiently. Answer: TRUE Because installment credit absorbs a company’s cash, many […]

A company’s trade area can be influenced by intangible factors, such as physical and political barriers. An important guideline for companies wanting to successfully compete internationally is to familiarize yourself with foreign customs, languages, and cultures, including their lifestyles, values, […]

For a new owner of an existing business, physical facilities and equipment costs are very similar to what would have been spent on a startup with all new facilities and equipment. The data shows that writing a business plan increases […]

E-commerce is replacing traditional retailing. The most important factor when evaluating the labor supply in an area is its prevailing wage rate. Answer: FALSE Market penetration pricing is a short-term pricing strategy that achieves high profits quickly. Answer: FALSE A […]

Having access to capital is called entrepreneurial readiness. American business people can be on their best American behavior and go overseas and offend the locals. This is, in part, due to the fact that business customs that are acceptable, or […]

Right-brain thinking is much like the image of a kaleidoscope. Pure franchising involves a system of franchising in which a franchisor sells a franchisee a complete business format and system. Answer: TRUE A company’s average collection period ratio tells the […]

Hiring a diverse workforce makes it more difficult to achieve creativity in the workplace. The sole proprietorship is the form of ownership with the least ability to accumulate capital. Answer: TRUE An option for acquiring equity capital is for the […]

Life cycle pricing is a short-term pricing strategy that assumes that competition will eventually emerge and the price will be lowered. Generally, the higher the current ratio, the stronger the small firm’s financial position. Answer: TRUE The CAPLine Program makes […]

Large companies have a natural advantage over small firms when it comes to preparing a strategic plan. Effective leaders make sure that workers have both the tangible and the intangible resources they need to do their jobs well. Answer: TRUE […]

One reason joint ventures fail is because entrepreneurs did not select a partner who shares their company’s values and standards of conduct. An important factor of e-commerce is speed. Answer: TRUE About 51 percent of new businesses fail within five […]

The Equal Employment Opportunity Commission (EEOC) supplies employers with a list of questions it considers illegal in interviews. Practices that are illegal in one country may be perfectly acceptable, even expected, in another. Answer: TRUE Today’s workforce responds best to […]

The most important ingredient that venture capitalists look for in judging the potential success of a small business is a competent management team. “Big box retailers” present an opportunity for many small business owners. Answer: FALSE Only about half of […]

Most firms calculate their quick assets by subtracting the value of their inventory from their current asset total. A limited partner is personally liable only for the amount of money she/he has invested in the partnership. Answer: TRUE Responsible online […]

It may appear in the incubation stage of the creative process that the entrepreneur is loafing, as he is taking time to reflect on the information collected. The most common reason online customers abandon their shopping carts is that the […]

There is no connection between social responsibility and profitability. When trying to prevent employee theft, business owners should create a “police state” environment and trust no one. Answer: FALSE With an existing business, the new owner can depend on employees […]

The real benefit to a business owner engaging in barter is the ability to “pay” for goods and services at her wholesale cost and to get credit for the retail price. The majority of first-generation family businesses do not survive […]

Although franchising is a popular way to do business in the United States, it is not a popular strategy in international markets. The executive summary of a business plan should highlight significant financial and operational events. Answer: FALSE A service […]

A public stock sale is an effective method of raising large amounts of capital, but it can be an expensive and time-consuming process filled with regulatory nightmares. Ethical behavior is doing what is “right.” Answer: TRUE Publicly-held companies must file […]

Although developing a strategic plan is important for large companies, it is not essential to managing a small company successfully because of its limited resources. Entrepreneurs have three basic strategies to choose from when establishing a new product’s price: a […]

The more innovative your domain and name, the better. The customer group that spends the most time in shopping malls is teenagers between the ages of 14 and 17. Answer: TRUE Although a small business manager must assume a wide […]

An assembly line is based on the principle of job simplification. For some businesses, e-mail takes a very low priority. Answer: TRUE An effective tool used to help assess ideas is the idea sketch pad. Answer: TRUE Time out of […]