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The most detailed and scrutinized section of a formal marketing plan is the a. competitor analysis. b. marketing strategy. c. market analysis. d. consumer analysis. Which of the following is a good source of consumer credit information? a. Trade-credit agencies […]

A business plan helps the entrepreneur anticipate the different situations that may occur. E-mail promotion provides a low-cost way to pinpoint customers and achieve response rates higher than those for banner ads. Answer: T The accounting system of a small […]

The return on the owner’s investment (equity) is a better measure of performance than a. the return on assets ratio. b. the current ratio. c. the quick ratio. d. the absolute dollar amount of income. The value of a depreciable […]

Promotional funds are determined according to past experience in which of the following methods? a. Spending as much as the competition b. What can be spared c. Percentage of sales d. Forecasted industry standard Which of the following is a […]

Describe the role trade intermediaries play in assisting small businesses that choose to go global. Identify the types of trade intermediaries that are most useful to small businesses. Three shortcomings of franchising include cost, restrictions on operations, and loss of […]

Direct selling practices such as pyramid schemes and front-loading are unethical. Though less recognized franchises exist, these rarely have the success rate of high profile, large franchisors, such as McDonald’s. Answer: F Many of these less recognized franchises are quite […]

One of the most important means of sharing business risks is a. preventive maintenance. b. insurance. c. a system of internal checks or control. d. good management. Though it is sometimes expensive to make socially responsible choices, a. small businesses […]

Product liability could be classified as a source of tort liability. Valuing a company is an easy task that results in a precise figure. Answer: F Valuing a business is neither easy nor exact, even under the best of circumstances. […]

Studies have shown that almost all small business managers carry sufficient insurance protection. A major weakness of a family business is that it has greater difficulty than a nonfamily business in focusing on long-run decision making. Answer: F A family […]

To transfer ownership in a corporation, it is only necessary to transfer shares of stock. The approach called spending as much as the competition does can lead the firm to copy the mistakes of rival firms, as well as their […]

If a new venture’s projected profit margins do not substantially exceed the reported profit margins of comparable businesses, investors are likely to doubt these projections. Founders typically try to push their somewhat reluctant children into positions of responsibility more quickly […]

The ideal period of life for starting a business is a. between the mid-20s and mid-30s. b. during the 20s. c. between the late 20s and early 40s. d. between 40 and 55. In a line organization, each employee has […]

Distinguish between artisan entrepreneurs and opportunistic entrepreneurs. Describe the distinctive features of each. Both wholesalers and equipment manufacturers/suppliers can be used as sources of funds. Answer: T A salesperson can help to build goodwill by understanding the customer’s point of […]

Any person capable of ________ may legally become a business partner. a. assenting to liability b. contracting c. contributing capital d. having a claim on assets Fine Framings, a small framing shop, uses markup pricing to arrive at a final […]

Newplant has the most experienced production employees and the lowest unit costs in its industry, indicating that it had benefited from a. experience curve efficiencies. b. learning effects. c. economies of scale. d. economies of scope. The most immediate goal […]

Altering the financial records of a firm such that the records do not reflect the true conditional of the firm is a. “gilding the lilies.” b. “plugging the numbers.” c. “cooking the books.” d. “creative accounting.” Profit-sharing plans a. provide […]

With a foreign licensing strategy, the company purchasing the right to manufacture and sell a product in overseas markets is called the a. royalty receiver. b. licensor. c. licensee. d. license initiator. The big picture includes all of the following […]

Accounting records can be kept in just about any form as long as they provide users with the data needed and are legally proper. Many entrepreneurs successfully grow their firms, but fail to develop an effective exit plan. Answer: T […]

Typical venture capitalists invest approximately ____ of their investment in later-stage businesses. a. one-fourth b. one-half c. three-fourths d. nearly all Leasing employees is a good alternative for small businesses because a. leasing companies take care of much of the […]

How can a successfully growing firm fall into a “growth trap”? Buying or developing CRM software leads to higher customer retention. Answer: F Explain and illustrate the nature of the operations process for production of both products and services. Include […]

The general environment is more narrowly defined than the industry environment because it focuses on specific segments, such as those relating to the economy, sociocultural trends, and geopolitical developments. Today, companies tend to focus on developed countries as they search […]

The son or daughter begins to function as a part-time employee in a family business during the a. pre-business stage. b. introductory stage. c. introductory functional stage. d. early succession stage. An understanding of the present value of a future […]

It is now illegal for employers to arrange for background investigations of job applicants. Holding stock issued pursuant to Section 1244 of the Internal Revenue Code (i.e., Section 1244 stock) offers no financial protection against corporate failure. Answer: F If […]

The executive summary in a business plan should come a. at the beginning. b. at the end. c. following the finance section. d. following the marketing section. Pure risk, as stated in the textbook, is a. a chance all entrepreneurs […]

Your mother prompting you to “act like a lady (gentleman)” is the result of which sociological influence? a. culture b. opinion leaders c. reference groups d. social class Generally speaking, a strategy is a. an action plan that guides resource […]

What are the principles that govern the firm’s financing? Calculations of net present value ignore the time value of money. Answer: F Three primary rewards of entrepreneurship are thought to be profit, independence, and personal fulfillment. Answer: Answer: Several principles […]

Excess cash should be a. invested. b. used to purchase assets. c. used to pay dividends. d. kept on hand. The primary advantage an entrepreneur gains by leasing rather than buying facilities is a. receipt of an investment tax credit. […]

Customer accessibility is important in locating an electrical contracting firm. Incubator organizations can provide advice on structuring a new business. Answer: T If they are based in the owner’s home, a business must conform to local zoning ordinances. Answer: T […]

Franchising is typically defined as a marketing system revolving around a two-party legal agreement whereby a franchisor is granted the privilege to conduct business as an individual owner according to the methods and terms specified by the franchisee. Personal selling […]

A change in leadership may play a role in bringing about a break with traditional methods of operation. Two major factors involved in grooming a son or daughter to enter the family business are the child’s aptitude and the child’s […]

Wilbur is attempting to raise some quick cash for his business by selling its accounts receivable to a finance company, this is called a. selling short. b. factoring. c. mortgaging the future. d. pledging receivables. Entrepreneurs’ choices that affect the […]

Many new businesses are formed as a result of the entrepreneur’s previous work experience, through which he or she sees ways to improve or modify a product. The entrepreneurs are usually drawn to opportunities that others reject because they misread […]

Entrepreneurs who are deeply committed to ethical values operate their businesses in ways that reflect a. the standard practices of the industry. b. their personal interpretations of those values. c. profit motivations above all others. d. their personal religious values. […]

According to Peter Drucker, the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth is a. creativity. b. innovation. c. capital spending. d. collaborating with competitors. Revenues from auction […]

Prospective investors are most attracted by business plans showing a. evidence of customer acceptance of the venture’s product or service. b. expense projections that are far lower than normal industry ranges. c. growth projections that are unbelievably strong. d. detailed […]

“Me, too” strategies are used by very few new ventures. Computer software packages can help a small business manager with some aspects of an accounting system but are generally not available to help prepare income statements or balance sheets. Answer: […]

Job shops in manufacturing use specialized equipment. What are the weaknesses of interviewing, and how can interviewing be used effectively in selecting employees? Answer: One of the major weaknesses of the interviewing process is that unskilled interviewers may think they […]

Observations about the external environment and organizational potentials can be brought together by means of a. an alignment strategy. b. the in-and-out assessment. c. a SWOT analysis. d. common sense critique. Which of the following best defines a partnership? a. […]

In seeking personnel for key positions, small firms sometimes turn to recruiting specialists called a. temporary help agencies. b. leasing companies. c. attorneys. d. headhunters. Trade between the United States and Mexico has increased since the enactment of the North […]

CarePair, a small business specializing in making and distributing hospital gowns to medical facilities, often sells its product on credit. The company maintains a ledger that divides accounts receivable into age categories based on the length of time they have […]

Which of the following is not one of the critical startup tasks involved in the preparation of the successful launch of a dot.com site? a. Creating and registering a site name b. Building a user-friendly site c. Promoting the firm’s […]

Driving as safely as possible is an example of a. loss prevention. b. loss avoidance. c. loss reduction. d. loss control Ideas Unlimited is a recently established consulting firm that specializes in providing retailers with information about regional sales trends. […]

A copyright notice should include a. the symbol (c). b. the date the work was published. c. the name of the copyright owner’s company. d. a listing of all other copyrights held by the owner. When is a company a […]

Just-in-time inventory systems note that firms should select suppliers immediately before they need to use the inputs those vendors will provide. Income-tax cheating by small business is sufficiently widespread to be recognized as a general problem. Answer: T An evoked […]

List the two basic ways to cope with risk in a small business and identify tools associated with each of these. Which method involves an insurance program? In a family business, there is a possibility for either conflict or harmony […]

A comprehensive break-even analysis entails a. examining revenue-cost relationships and establishing sales forecasts. b. analyzing marketing strategy. c. the use of comparison pricing. d. approximations of debits and credits. Mark Michaels is the owner of Delectable Delights, a specialty store […]

List the three basic types of acquisitions and identify the purpose of each. The primary factor in determining the location for a sawmill would probably be proximity to the market. Answer: F To be economical, a business like a sawmill […]

Entrepreneur Carrie McAbee’s purchase of a Hair Diamond kiosk franchise is an example of a. how an entrepreneur’s lack of due diligence can lead to business failure. b. the opportunities that piggyback franchises offer to entrepreneurs. c. how important franchisor […]

The general environment is very narrow and includes the forces that directly impact a firm and its competitors. The forecasting process can be characterized by the point at which the process is started and the nature of the predicting variable. […]

In establishing a management training program, Mark Russell should be consider all of the following factors except a. The need for training. b. A plan for training. c. The timetable for training, d. The design of the training facilities. In […]

Earnings before taxes are computed by deducting the firm’s financing costs from its ______ income. a. total b. projected c. net d. operating A business plan is a. a legal document for raising capital. b. a prospectus. c. a selling […]

A business owner’s policy is unique in that a. it contains no insurance to value feature. b. the business owner cannot be the designated beneficiary. c. property insured by the policy must have an after-loss residual value. d. it cannot […]

In a partnership, each partner has agency power, which means that a. upon the death of one partner, the remaining partners can operate the business. b. a partner can legally bind all members of the firm. c. an executor can […]

Making components is preferable to buying them from an outside vendor when using idle plant capacity would boost production efficiency, in-house production would protect a secret design, or the firm can reduce the cost of investment by purchasing equipment that […]

Regardless of their level of sophistication, available accounting systems a. rarely provide an accurate picture of operating results. b. often do not reveal employee fraud, theft, waste, and record-keeping errors. c. provide financial statements for internal use but not for […]

Which of the following statements is true of credit bureaus? a. They act as third-party underwriters of credit to companies which then offer this to customers. b. They provide a likely scenario of future use/misuse of credit. c. They profile […]

Risk management and insurance management are synonymous. Although the owner of a small business does not make long-term investment decisions often, capital budgeting is nonetheless important to the successful operation of the firm. Answer: T A franchise is typically attractive […]

Unlike in traditional retailing where customers are demanding and first impressions are important, e-commerce firms do not have to worry about initial communications, since bad first impressions can be overcome with follow-up contacts and high-quality Web designs. In a recent […]

The parent-founder of a family business is contemplating the potential conflict between family concerns and business interests. He concludes that a primary family concern is a. nurture. b. profitability. c. survival. d. avoidance of excessive business debt. A primary consideration […]

A current ratio is calculated by dividing a. current assets by current liabilities. b. accounts receivable by daily credit sales. c. current assets plus accounts receivable by current liabilities. d. credit sales by accounts receivable. Planning for an IPO requires […]